The Credit Edge by Bloomberg Intelligence RBC Sees Private Credit in Peril as Rates Stay High
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Dec 24, 2024 Andrzej Skiba, Head of US Fixed Income at RBC Global Asset Management, dives into the potential challenges facing the private credit market as interest rates remain high. He emphasizes the advantages of public markets, citing better leverage profiles. Skiba, alongside analysts James Crombie and Mike Holland, explores upcoming trends in financial-sector debt, enticing opportunities in technology and media bonds, and strategies to navigate market volatility. They also touch on the implications of excessive leverage and the shifting landscape of high-yield securities.
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Market Outlook for 2025
- Expect market volatility as investors grapple with the new administration and policy mix.
- Fixed income will eventually become attractive again due to historically high yields.
Managing Volatility
- Reduce risk by selling bonds and decreasing exposure to long-duration assets to handle volatility.
- Derivatives can play a supporting role, but shouldn't be the primary method for managing volatility.
High-Yield Market Dynamics
- High-yield market is technically strong due to limited hot money inflow despite tight spreads.
- Capital flowing into private credit and leveraged loans helps address refinancing needs and reduce default risk in high-yield.