October 14, 2016
The leveraged credit market turned in another impressive quarter, but valuations suggest caution going forward. Prices have risen for high-yield bonds and bank loans, and we are concerned about rising levels of leverage, ongoing troubles in the banking sector, and uncertainty surrounding upcoming political events—including the U.S. presidential election, the Italian constitutional referendum, and key European elections. Nevertheless, interest expense coverage ratios for non-commodity high-yield issuers are strong, and the domestic U.S. economy is relatively healthy. In this environment, we will likely be selling into strength and buying on weakness. As a lower beta credit play, we believe the bank loan market currently offers better value than high-yield bonds.
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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Managing Director Justin Takata discusses the technical and fundamental drivers of value in investment grade corporates, and U.S. Economist Matt Bush addresses recession timing and the possible progression of policy.
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