Justin Jewell, BlueBay Head of European High Yield, analyzes the high yield bond market, which could benefit from a resurgence in M&A activity
After a difficult 2023 for markets, the economy has essentially found its way back, which in a context of declining inflationary pressures has given investors greater confidence that they have dealt with the worst of the challenges. Obstacles, such as worsening of credit quality, together with potential favorable factors, such as Fed interest rate cuts, would balance each other out. Investors have returned to a world of income from high-yield assets. High Yield bonds now offer attractive compensation for the risk of rate-related shocks and investors can realistically expect returns of 7-9% compared to 2-3 years ago.
THE MAJOR CHALLENGE FROM THE REAL ECONOMY AND POLITICAL MIX
This is underlined by a comment on the prospects of the High Yield bond market, which could benefit from a recovery in M&A operations and new issues, by Justin JewellBlueBay Head of European High Yield, RBC BlueBay, according to which the biggest external challenge is represented by what is happening inreal economy and the mix at the political level. Rates have been a powerful driver over the last couple of years, but some challenges remain. In 2021-22 defaults were close to zero and are now forecast to return to the 2.5-4% range. Companies operate with higher costs of capital and may have stretched balance sheets, and some may struggle…
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** This article was written by FinanciaLounge
