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Market Insights

2010 Global High Yield Bond and Bank Loan Outlook: The Flight to Credit Risk

The global high yield bond and U.S. bank loan markets posted record-high returns for the year 2009. While another such year is not in the cards mathematically in 2010, we believe attractive returns can be realized with the improving fundamental backdrop of declining default rates and spreads that are wider than the historical average.
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January 29, 2010

2010 Economic and Market Outlook

Unprecedented global monetary and fiscal stimulus actions have helped pull the North American economy out of the deep recession and have systematically stabilized the financial markets.
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January 19, 2010

Archive
Commercial Real Estate Outlook: Difficult environment still offers opportunities [+/-] summary   January 15, 2010

Commercial real estate fundamentals are likely to remain for several years before any significant rebound. Increasing vacancies, decreasing effective rents and increasing capitalization rates will put downward pressure on valuations through the first half of 2010. Despite the continued downward pressure, there are opportunities to employ commercial real estate capital even in this very difficult environment.

Is the CCC Beta Rally Over? An Argument for BB Rated Bonds [+/-] summary   January 11, 2010

History suggests that the days of outsized relative returns for CCC bonds compared to BB bonds are numbered. It will require alpha via careful security selection to generate superior performance in CCC securities in the future, not merely an effort to load up on beta via any CCC issue. The recent outsized returns in CCC and below rated bonds are pointing towards more compelling valuations in particularly BB and also B rated bonds.

High Yield Bank Loans: The Case for a Strategic Allocation [+/-] summary   December 4, 2009

There are compelling arguments for investors to use high yield bank loans – or corporate loans with credit ratings below those of investment grade loans – as a standalone strategy or asset class, or to complement a high yield bond strategy.

Benchmarking High Yield Bonds: The Case for a Peer Group vs. an Index [+/-] summary   November 4, 2009

For certain institutional fixed income strategies, an index benchmark is less effective than a peer group when measuring the added value. We recommend using an institutional peer group rather than an index for a high yield bond benchmark.

Securitized Markets Gain Benefits from TALF, PPIP [+/-] summary   September 9, 2009

The distress of the economic recession and financial crisis left investors and lenders averse to any form of risk taking.

Global High Yield Bond Market Outlook: The "Return" of Beta [+/-] summary   August 24, 2009

There was a systemic meltdown in the global credit markets in the fourth quarter of 2008, but beta has returned with a vengeance in 2009.

Shifts in fixed income make manager selection more important than ever [+/-] summary   July 29, 2009

The perception of fixed income as a mundane and sleepy asset class has a lot in common with black and white television: They’re both terribly out of date.

The High Yield Bond Market: Strong Start to 2009 [+/-] summary   April 27, 2009

The high yield bond market has raced out of the gates in 2009 with strong year-to-date performance. In fact, high yield bonds have outperformed nearly all major asset classes through mid-April. In our global high yield bond market outlook published January 12, titled "The Power of the Coupon," we upgraded our view for high yield bond allocations from marketweight to moderate overweight. While spreads have tightened 225 basis points – from +1,677 at year end to +1,452 on April 15 – we believe the argument for an overweight in high yield bonds remains strongly intact. With a market yield of 17.6% and an average price of $63, the total return potential from both coupon and price return continues to be very attractive.