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Wednesday 04 March 2020
Investment Talks, Perspectives
While the headlines are horrific and the daily volatility is painful, the broad US high yield market, as represented by the ICE BofA US High Yield Index, was down 1.55% in February as well as for the year through February 29th.
As opposed to the start of the year, there are now significant dispersions between sectors. Energy is the obvious victim, with exploration and production (E&P) sector returns down 13.85% through Feb 29th, while midstreams/pipelines were only down 3.78% YTD.
As US Treasury yields have plummeted (the yield on the 10-year was just under 1% on March 3rd), high yield spreads have also gapped higher with the option-adjusted spreads (OAS) at 497bp at last night’s close, which is 137bp wider than where we started the year and 98bp wider than where we started the month of February.
After three days of meeting with high yield companies at a recent conference, we believe news at a company level is still generally favorable, with some obvious exceptions.
In summary, despite market volatility, we believe the outlook for the high yield asset class is still favorable. While we are proceeding with caution, we remain relatively optimistic about the year ahead for high yield.
Unless otherwise stated, all information contained in this document is from Amundi Pioneer Asset Management (“Amundi Pioneer”) and is as of February 29, 2020.
The views expressed regarding market and economic trends are those of the authors and not necessarily Amundi Pioneer, and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading on behalf of any Amundi Pioneer product. There is no guarantee that market forecasts discussed will be realized or that these trends will continue. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested.
This material does not constitute an offer to buy or a solicitation to sell any units of any investment fund or any service.
Date of First Use: March 4, 2020.
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