The Credit Edge by Bloomberg Intelligence
RBC Sees Private Credit in Peril as Rates Stay High
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.
47:49
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Quick takeaways
- RBC warns that prolonged high interest rates could negatively impact the private credit space's resilience and leverage profiles.
- There's a cautiously optimistic outlook for high yield, but investors must navigate risks associated with rising defaults and economic pressures.
Deep dives
Market Dynamics and Interest Rates
U.S. markets are experiencing growth with a rally as interest rates decrease, but there are concerns regarding the Federal Reserve's slower-than-expected rate cuts. The tightening of bond spreads indicates high demand for yield, yet the current economic policy environment suggests potential inflationary pressures which could lead to sustained high borrowing costs. Investors are particularly wary of how geopolitical risks and trade relationships, especially with tariffs imposed by the incoming administration, may impact the market outlook. This creates a cautious sentiment as defaults and bankruptcies begin to rise within the sector, indicating that volatility is expected in the near future.
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