Baring Asset Management: Interest Rate Hike Is Not Expected To Hinder High Yield Bond Performance
After deleveraging, high yield companies have plenty of cash on hand.
Balance sheet
Prudent management helps significantly reduce the default rate, which is conducive to the performance of the global high-yield bond market.
Baring Asset Management believes that this trend will continue. Moodie predicts that the default rate will fall from about 2.1% to 1.6% in March next year, and standard & Poor's forecast.
Default rate
It will further fall to 1.5% by the end of next year.
Because high yield companies do not need to refinance large amounts of debt, high-yield bonds need to be US $40 billion this year and next.
debt
Refinancing is far lower than last year's $325 billion.
The burden of refinancing is small and within the controllable range.
Baring Asset Management believes that high-yield bonds can provide security for fixed income portfolio investment.
As economic growth and inflation rise, the performance of most bond markets may be disappointing, but the performance of high-yield bonds is more sensitive to issuers' credit quality than interest rate changes.
Therefore, the bank believes that the market has expected to raise interest rates in the second half of this year, and the performance of high-yield bonds will be stronger.
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