High-Yield and Bank Loan Outlook – July 2016

Report Highlights

• The Credit Suisse High-Yield Bond and Leveraged Loan indexes posted gains of 5.9 percent and 2.9 percent in the second quarter, their best quarterly performance since the first and third quarters of 2012, respectively.
• With global monetary policy growing more accommodative, foreign flows into the U.S. should have the effect of another round of quantitative easing to U.S. financial markets. Assets offering higher yields than U.S. Treasurys will continue to benefit from the persistent low-rate environment.
• As yields fall, investors should more frequently evaluate loss and default assumptions. Our research suggests that high-yield bond recoveries should improve from the lower-than-average trend in 2015–2016 given the presence of more secured bonds in the market compared to the pre-crisis period. We expect leveraged loan recoveries will be lower in the next default cycle, but yields continue to compensate for credit risk.

Important Notices and Disclosures

This article is distributed for informational purposes only and should not be considered as investing advice or a recommendation of any particular security, strategy or investment product. This article contains opinions of the author but not necessarily those of Guggenheim Partners or its subsidiaries. The author's opinions are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Guggenheim Partners, LLC. ©2016, Guggenheim Partners. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information.

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