Guggenheim 2Q High-Yield and Bank Loan Outlook: Adjusting Yield Expectations and Managing Risk Among Elevated Loan Refinancings
While good for borrowers, refinancing activity effectively lowers investors’ spread income
NEW YORK, April 18, 2017 (GLOBE NEWSWIRE) -- Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, today provided its Second Quarter 2017 High-Yield and Bank Loan Outlook.
Among the highlights in the 12-page report:
- The primary issuance market is witnessing a strong resurgence in activity, but refinancing makes up the lion’s share. Combining high-yield corporate bond and institutional leveraged loan issuance, refinancing volume represented 52 percent and 66 percent of total new issue activity in 2016 and the first quarter of 2017, respectively, compared to the 10-year average of 43 percent.
- Borrowers shaved roughly 90 basis points from contractual spreads through refinancing transactions in the first quarter, effectively lowering investors’ spread income. This is something investors should factor into yield expectations going forward.
- Even with adjusted return expectations, bank loans look more attractive than high-yield corporate bonds due to their higher position in the capital structure, their floating coupons, and their lower spread durations.
- With spreads at relatively tight levels, the sector appears vulnerable to spread-widening. We expect investors to harvest gains unless we see more concrete legislative progress on fiscal policy in Washington.
For more information, please visit http://www.guggenheiminvestments.com.
About Guggenheim Investments
Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with $209 billion1 in assets across fixed income, equity, and alternative strategies. We focus on the return and risk needs of insurance companies, corporate and public pension funds, sovereign wealth funds, endowments and foundations, consultants, wealth managers, and high-net-worth investors. Our 275+ investment professionals perform rigorous research to understand market trends and identify undervalued opportunities in areas that are often complex and underfollowed. This approach to investment management has enabled us to deliver innovative strategies providing diversification and attractive long-term results.
1Guggenheim Investments total asset figure is as of 12.31.2016. The assets include $12.3bn of leverage for assets under management and $0.4bn for assets for which Guggenheim provides administrative services. Guggenheim Investments represents the following affiliated investment management businesses: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Real Estate, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management.
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Media Contact Ivy McLemore Guggenheim Partners 212.518.9859 Ivy.McLemore@GuggenheimPartners.com
