How Healthy Is the High Yield Bond Market?

By Matthew J. Eagan, CFA®

Actively Seeking Opportunity in the High Yield Market

In today’s late expansion phase of the credit cycle, Matt Eagan, CFA®, Head of Full Discretion Team, Portfolio Manager, Loomis, Sayles & Company, is not forecasting a large increase of losses in the high yield bond market. In fact, he believes there are compelling buying opportunities to pursue.

Highlights in this video include:
  • It appears to be a benign phase of the credit cycle, where losses from both downgrades and defaults in high yield bonds should be low.
  • Trading is expected to be rangebound.
  • Riskier areas of the high yield market may include office real estate because of the pandemic effect and the lower-quality area of the syndicated bank loan market.
  • A compelling buy for high yield at recent risk-premium levels.
The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) are for informational purposes only and represent the investments and views of the portfolio managers as of March 25, 2024 and are subject to change and may change based on market and other conditions and without notice. This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete or accurate.

All investing involves risk, including the risk of loss. The views and opinions expressed may change based on market and other conditions. They are subject to change at any time based on market and other conditions. There can be no assurance that developments will transpire as forecasted. Past performance is no guarantee of future results.

Unlike passive investments, there are no indexes that an active investment attempts to track or replicate. Thus, the ability of an active investment to achieve its objectives will depend on the effectiveness of the investment manager.

Fixed income securities may carry one or more of the following risks: credit, interest rate (as interest rates rise bond prices usually fall), inflation and liquidity.

Credit risk is the risk that the issuer of a fixed-income security may fail to make timely payments of interest or principal or to otherwise honor its obligations.

Interest rate risk is a major risk to all bondholders. As rates rise, existing bonds that offer a lower rate of return decline in value because newly issued bonds that pay higher rates are more attractive to investors.

High yield bonds are rated below BBB/Baa. Ratings are determined by third-party rating agencies such as Standard & Poor's or Moody's and are an indication of a bond's credit quality.

Natixis Distribution, LLC and Loomis, Sayles & Company, LLC are affiliated.

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