Looking at Global High Yield market, Come illustrated byIce Baml Global High Yield Index, returns have decreased compared to their historical peaks, with mediums considered acceptable for the High Yield of 8-9%. The peaks of over 10%, guided by the crises, were few and very distant from each other, and overall, they cover one handful of weeks in the last 14 years.
Bond investors: Look at the High Yield USA
Explains it Andrew LakeHead of Fixed income of Mirabaud Asset Management underlining that today’s average return is around 7.5% which, in our opinion, represents an interesting entry level for investors in the High Yield. If the returns should remain at this level, our analysis of the performance scenario indicates a total return to 12 months of about 5.3%.
As for the performance driver, “We believe that 2025 will be the year of returns trobbed by coupons. The sunglasses should take us to an average single number performance range, with the possibility of obtaining slightly higher returns thanks to a good selection of credit and a stable economic environment in the United States. We also see a potential for a reduction in returns compared to current levels. If the returns drop to 6%, we would probably enter one High range of riterasingle number in the next 12 months “.
Looking at bonds High Yield At the regional level, our preference – explains the expert – goes to the United States, in consideration of their economic solidity and 2% growth forecasts. With the average coupons of the new emissions that approach the maximum ten -year and the absolute levels of return that still remain attractive compared to just a few years ago, we see a continuous value in the high performance market, even if the individual selection of credits is what guide this opportunity. The market of new emissions is open, thus reducing the mythical refinancing wall, and with default rates that should remain low, The asset class is in good shape for another solid year of returns. The spreads are restricted, But given the economic context, they could remain such for some time.
The View of Mirabaud Asset Management
Each move of the Trump president He followed carefully and his policies will probably have an impact on the performance of all asset class, especially in consideration of the risks represented by persistent inflation. As for the High Yield in particular, the Trump agenda focused on growth should be positive for the asset class.
Interest rates represent another fundamental factor for the US market. We plan that this year the Federal Reserve will cut the rates twice, but this prediction continues to change quickly given the uncertain direction of inflation and the unknowns that still surround the policies of President Trump. At the moment, the mantra is “taller”, but the situation could change quickly if we started seeing a deterioration of the economic context.
In terms of sectors, “we believe that energy is an interesting space to consider in the United States, as well as transport. Due to the downsizing of Green policies by Trump, the sectors and companies related to the environment and sustainability have now less favorable prospects “.
Focus on Europe
In Europethe opportunities are more nuanced due to the weakest economic context. This year the GDP will be expected to grow a warm 1% and that interest rates will be reduced aggressively – three or four cuts is our current forecast. There are good credits on the market, but analysis and a rigorous selection are fundamental. Unlike the United States, for Europe We stick to an “Up in Quality” approach, given the weakest economic context. We continue to prefer European banks and, among these, national leaders.
Although in the economies developed the cycle of reduction of rates has already begun, the speed and trajectory of the recovery in the main economies remain uncertain, creating a nebulae perspective and feeding on the current volatility. For the United States, a “no landing” is expected, which creates potential opportunities for superperformance for the weakest credits. For this reason, “let’s consider The US High Yield Like our “performance generator” preferred by bond investors. The growing divergence between the United States and Europe makes an approach indispensable disciplined investment, highly convinced and active “.
