High Yield Bonds & Loans: Adapting to Changing Markets
Streaming Income - A Podcast from Barings
The Impact of Higher Interest Rates
This chapter delves into how higher interest rates can negatively affect borrowers and the economy, discussing the risks associated with managing loans and bonds during such market conditions. The podcast explores the potential disruptions in term premiums due to concerns about deficit spending and how a steepening treasury curve could impact market dynamics and investor sentiment.
Against a backdrop of stickier-than-expected inflation, higher-for-longer rates, and persistent geopolitical risks, what is the outlook for high yield bonds and senior secured loans? Global High Yield Portfolio Manager, Brian Pacheco, weighs in.
Episode Segments:
(03:29) – How the macro backdrop has changed for high yield this year
(06:28) – Why the Barings team is bullish today on loans
(08:37) – Contrasting the steady return profile of loans with higher duration assets
(10:14) – Where loans sit from a valuation perspective today
(11:39) – How higher rates may impact the default picture
(14:20) – Liability Management Exercises (LMEs) – why they matter
(17:02) – Why high yield bonds may offer more value than commonly perceived
(25:33) – Risks to watch: Accelerating inflation, term premiums, & geopolitics
Certain statements about Barings LLC made by the participants herein may be deemed to be “testimonials” or “endorsements” as those terms are defined in rule 206(4)-1 under the Investment Advisers Act of 1940, as amended. Participants were not compensated in connection with their participation in this program, although in certain cases they are investors in Barings LLC sponsored vehicles. These investments subject such participants to potential conflicts of interest in making the statements herein.
IMPORTANT INFORMATION
Any forecasts in this podcast are based upon Barings’ opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Investment involves risk. The value of any investments and any income generated may go down as well as up and is not guaranteed. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Any examples set forth in this podcast are provided for illustrative purposes only and are not indicative of any future investment results or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this podcast. No representation is made that an investment will be profitable or will not incur losses.
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