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Forward Guidance

Why Credit Conditions Have Actually Eased Over Past Year | Oaktree’s Wayne Dahl on High-Yield Bonds, Leveraged Loans, Private Credit, and the Recession Yet To Arrive

Jul 29, 2024
Wayne Dahl from Oaktree, an expert in high-yield bonds and leveraged loans, delves into the evolving credit landscape. He discusses how improved quality and low default rates have made high-yield bonds appealing, with yields around 7.5%-8%. The rise of private credit is highlighted as a critical factor amid traditional lending challenges. Dahl also sheds light on how borrowers are refinancing amid rising rates and the increasing appeal of structured credit for higher yields, all while navigating the economic outlook for potential recessions.
01:09:46

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Podcast summary created with Snipd AI

Quick takeaways

  • Current high-yield bonds offer favorable yields between 7.5% and 8% due to improved issuer quality and discounted prices.
  • Despite recession predictions, low default rates in the high yield market indicate a resilient economic environment with prudent corporate management.

Deep dives

Current Environment of High Yield Bonds

The current high yield bond market offers yields between 7.5% and 8%, which appears favorable compared to historical averages, especially considering the significant rise in quality of issuers in the past few years. Post-COVID, many companies that previously held investment-grade ratings have since downgraded to high yield, leading to a market with a higher percentage of double-B rated bonds. The discounted prices at which many high yield bonds are trading provide investors with potential for even greater returns if the bonds are held to maturity or refinanced favorably. Overall, the combination of current yields and improved issuer quality makes high yield bonds attractive to investors seeking stable returns.

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