Guggenheim Second Quarter 2024 High-Yield and Bank Loan Outlook: Investor’s Guide to Default and Recovery Dynamics

NEW YORK, May 02, 2024 (GLOBE NEWSWIRE) — Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, today provided its Second Quarter 2024 High Yield and Bank Loan Outlook. Titled “Investor’s Guide to Default and Recovery Dynamics,” the report discusses the paradox of spreads remaining tight while defaults persist.  

Among the highlights in the report:

• Leveraged credit has continued to deliver positive performance, reflecting the improvement in the economic outlook, strength in credit fundamentals, and the benefit of high yields in a more stable rate environment.
• Capital markets have become much more active as companies take advantage of tighter spreads, though the increase in activity is largely driven by refinancing rather than new capital supply.
• Rating migration improved in leveraged credit, turning positive on a six-month trailing basis for high yield bonds, and less negative for leveraged loans.
• In general, credit conditions have improved, and some borrowers have been able to reduce interest costs through repricing activity. But there remains a subset of issuers that have been sidelined and may be relying on the Fed to deliver some form of easing.
• Despite the improved economic outlook, the persistence of defaults at a significant rate suggests continued risks, but it hasn’t led to wider risk premiums for other companies.
• A possible explanation is that defaults are more anticipated in this cycle than in the past.
• Since rating agencies have been quicker to identify high default risk, markets have been able to adjust to these risks more proactively through pricing.
• We discuss the three main contributing factors to current trends in recovery rates and anticipate some improvement by the end of 2024.
• Despite an overall positive economic trajectory, the persistence of defaults in 2024 underscores the importance of strategically navigating the current environment via active management and credit selection.
• The risk-reward for high yield bonds before the Fed starts easing continues to look favorable.

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 more than $234 billion¹ in total 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 235+ 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 opportunities and attractive long-term results.

1. Guggenheim Investments Assets Under Management are as of 3.31.2024 and include leverage of $14.5bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, and GS GAMMA Advisors, LLC.

Investing involves risk, including the possible loss of principal. In general, the value of a fixed-income security falls when interest rates rise and rises when interest rates fall. Longer term bonds are more sensitive to interest rate changes and subject to greater volatility than those with shorter maturities. During periods of declining rates, the interest rates on floating rate securities generally reset downward and their value is unlikely to rise to the same extent as comparable fixed rate securities..  High yield and unrated debt securities are at a greater risk of default than investment grade bonds and may be less liquid, which may increase volatility. Investors in asset-backed securities, including mortgage-backed securities and collateralized loan obligations (“CLOs”), generally receive payments that are part interest and part return of principal. These payments may vary based on the rate loans are repaid. Some asset-backed securities may have structures that make their reaction to interest rates and other factors difficult to predict, making their prices volatile and they are subject to liquidity and valuation risk. CLOs bear similar risks to investing in loans directly, such as credit, interest rate, counterparty, prepayment, liquidity, and valuation risks. Loans are often below investment grade, may be unrated, and typically offer a fixed or floating interest rate.

This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy, or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC, or its subsidiaries. The opinions contained herein are subject to change without notice. Forward-looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.

Media Contact
Gerard Carney
Guggenheim Partners
310.871.9208
[email protected]

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