/institutional/perspectives/sector-views/high-yield-and-bank-loan-outlook-january-2017

High-Yield and Bank Loan Outlook: Focus on Floating Rate

Conditions bode well for credit, but a more aggressive Fed and geopolitics could bring volatility. 

January 13, 2017


Report Highlights

We expect an improvement in leveraged credit fundamentals on the back of an earnings recovery and macroeconomic conditions, but it appears the majority of this has already been priced into spreads. Entering 2017 with the tightest high-yield bond spreads since August 2014, we expect this will mostly be a year of clipping coupons in high yield.

  • The loan market looks appealing as LIBOR is set to move above existing LIBOR floors and the demand for floating-rate products accelerates.
  • The evolving geopolitical environment could create temporary turbulence.
  • Assessing the balance of risks, we conclude that this is not yet the time to sell credit, but another year of double-digit returns in credit is unlikely.
  • Combining measures of leverage, interest coverage, and return on capital in a single Corporate Health index allows us to estimate default rates 12 months in the future. Our work supports the view that 2017 will prove to be a more benign credit environment than 2016.
 

FEATURED PERSPECTIVES

August 24, 2022

Credit Yields Look Attractive Despite Rising Recession Risks

Signposts for credit investors as the next recession approaches.

August 19, 2022

Stocks Are in Trouble if S&P Fails to Break Above its 200-day Moving Average

Deeper losses for equities may lay ahead.

August 02, 2022

Third Quarter 2022 Fixed-Income Sector Views

Relative value and performance drivers across fixed-income sectors.


VIDEOS AND PODCASTS

Fed Day: The Argument for 100 Basis Points 

Fed Day: The Argument for 100 Basis Points

Scott Minerd, Guggenheim Partners Global CIO and Chairman of Guggenheim Investments, joins Bloomberg TV on Fed Day.

Macro Markets Podcast 

Macro Markets Podcast Episode 22: Investors' Guide to the Fed’s Hard Landing

Brian Smedley, Chief Economist and Head of the Macroeconomic and Investment Research Group, discusses the Fed’s third straight 75 basis point hike and its meaning for the economy and investors.







© Guggenheim Investments. All rights reserved.

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 Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management.