Guggenheim Q4 High-Yield and Bank Loan Outlook: Valuations Suggest a Time for Caution

NEW YORK, Oct. 14, 2016 (GLOBE NEWSWIRE) — Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, today provided its Fourth Quarter 2016 High-Yield and Bank Loan Outlook. Among the highlights in the report:

  • The high-yield bond and bank loan markets are already pricing in strong fundamental credit performance, which makes us cautious as leverage levels rise and as we head into a seasonally volatile period.
  • Despite the recent rise in prices and tightening of spreads, interest expense coverage ratios for non-commodity high-yield issuers are relatively low, and the domestic economy is resilient. We estimate that third-quarter U.S. gross domestic product (GDP) growth will come in around 2.5 percent.
  • A rebound in oil prices will also help further fuel the recovery in the energy sector, making room for more spread compression.
  • As the effects of a strong dollar and weak oil prices subside, we believe nonfinancial corporate bond issues are positioned to deliver strong performance in 2017.
  • As the lower beta credit play, we believe the bank loan market offers better value than high-yield bonds despite the latter’s strong performance over the summer.

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About Guggenheim Investments

Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with $202 billion1 in 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 275+ 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 and attractive long-term results.

1Guggenheim Investments total asset figure is as of 6.30.2016 and includes $11.4bn of leverage for assets under management and $0.5bn for assets for which Guggenheim provides administrative services. Guggenheim Investments represents the following affiliated investment management businesses: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Real Estate, LLC, Transparent Value Advisors, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management.

Investing involves risk. In general, the value of fixed-income securities falls when interest rates rise. High-yield securities present more liquidity and credit risk than investment grade bonds and may be subject to greater volatility. Investments in bank loans securities involve special types of risks, including credit risk, interest rate risk, liquidity risk and prepayment risk.

This information herein is distributed for informational purposes only and should not be considered as investing advice or a recommendation of any particular security, strategy or investment product. This material contains opinions of the author but not necessarily those of Guggenheim Partners or its subsidiaries. The author’s opinions 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. ©2016, Guggenheim Partners, LLC.  No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Guggenheim Partners, LLC.

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Ivy McLemore
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