The Insight by Oaktree Capital
The Roundup: Top Takeaways from Oaktree’s Quarterly Letters – September 2023 Edition
Sep 26, 2023
Portfolio managers discuss the challenges of predicting interest rate moves and their impact on speculative grade credit. They also explore the effects of government spending on energy and infrastructure investments and the potential for attractive investments in Chinese equity markets. Plus, the importance of observing actions of governments and companies in emerging markets.
19:22
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Quick takeaways
- Rigorous credit analysis, rather than inexpensive debt, will be vital for generating superior returns in the face of higher borrowing costs.
- The quality in the loan market has deteriorated, leading to increased default rates and creating investment opportunities for skilled investors.
Deep dives
Global Credit Ahead of the Curve
The US yield curve has exhibited considerable volatility in 2023, reflecting the fickle nature of investors' macroeconomic expectations and the challenge of predicting interest rate moves. The high volatility has led to increased concerns about a recession and a softer landing for the US economy. However, despite the volatility in the rates market, average yields for US high-yield bonds have remained relatively range-bound, reflecting the resilience of the underlying US economy. Proper underwriting and the ability to dynamically allocate between asset classes are crucial for credit investors in this uncertain environment.
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