High Yield, Bank Loans, and Non-Agency RMBS for 2014-2015

May 19, 2014 | ,

Given the ongoing low interest rate environment, fixed income investors continue their unprecedented quests for yield. With the persistent slow growth in the U.S., necessary monetary easing in Europe and Japan, and the sustained slowdown in China, U.S. rates that were previously expected to rise moderately in 2014 and 2015 are now projected to rise at a much slower pace, if not remain range-bound. As a result, we expect continued strong interest in the fixed income sectors that have offered the most appealing yields and returns over the last five years: high yield, bank loans, and non-agency residential mortgage backed securities. The following paper analyzes current valuation levels as well as future return prospects over the next few years.

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This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: Eight-line chart showing 2023 returns for various below-investment grade leveraged loan and high yield indices. Chart subtitle: 2023 has been the year of the junk rally as CCC bonds and loans have outperformed their higher-quality peers. Chart source: Credit Suisse as of June 30, 2023. Chart visual description: Data is daily, from January 3 through June 30. Y-axis is labeled “Return” and ranges from 0% to 12% in 2% increments. X-axis is labeled monthly from Jan-23 through Jun-23. CS leveraged loan indices’ lines are plotted in shades of green, and get lighter from better to worse quality: CS Leveraged Loan Index in darkest green, BB Loans, B Loans, and CCC Loans in light green. CS High Yield indices are plotted in shades of purple, with same better to worse quality in darker to lighter shades: CS High Yield Index in dark purple, BB High Yield, B High Yield, and CCC High Yield in lightest purple. Chart data description: Lines generally follow same movements upward and downward throughout the year, but CCC categories have tended to lead since February. Most recent data point at June 30: CS Leveraged Loan Index at 6.33%, BB Loans at 4.58%, B Loans at 6.86%, and CCC Loans at 8.32%. CS High Yield Index at 5.84%, BB High Yield at 4.49%, B High Yield at 5.82%, and CCC High Yield at 10.99%. Please contact us for the full data set. End chart description. See disclosures at end of document.


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