MADRID, 14 Ene. (EUROPA PRESS) -
The firm La Française AM (LFAM) points out in a report about the prospects in the high-risk credit market ('high yield', in the jargon of the sector, which implies assuming greater risk at the expense of receiving a better return) which expects returns of between 5% and 7% for the global scenario in 2024.
The report, signed by the entity's director of high yield investments, Akram Gharbi, explains that historically, over the last six monetary cycles in the United States since 1995, the performance of this market has been "systematically positive when the "Federal Reserve (Fed) has ended the tightening of monetary policy."
More specifically, the firm has indicated that, although opportunities in this market "are increasingly scarce", they continue to see some in European and - especially - American issuers in the services, healthcare, technology, media and telecommunications sectors. , as well as in bank debt, which presents a better premium compared to corporate debt.
By geography, they stay away from emerging markets because the valuation is not attractive compared to the US high-yield credit market, since the yield curve is more profitable with opportunities in durations of 5 to 7 years in high-quality issuers. quality.
However, they have in turn warned that they expect default rates to increase in Europe with respect to 2023 levels and remain relatively stable in the United States, although this increase in defaults would not be "massive" because the situation financial performance of companies (leverage, liquidity, etc.) "is still quite good compared to previous cycles."
On the other hand, this segment of the debt market, like most of the economy as a whole, presents risks of latent geopolitical conflicts and the large number of electoral cycles that are to come in 2024.
"With the upcoming presidential elections in the United States, the threat of a Trump return looms, in which case, the impact on spreads would be greater in emerging and European markets than in the credit markets of the American country," he said. The report.
The investment manager and head of credit analysis at Jupiter AM, Luca Evangelisti, has pointed out that the CoCos (hybrid bonds between debt and equity that can be converted into shares of the issuing entity; it is a type of AT1 debt) issued during the recent months "contain potential to generate high returns over the coming years."
The executive has expressed his confidence in this asset class despite the turbulent period after the collapse of Credit Suisse, since then CoCos holders lost their entire investment.
Linked to this, Jupiter AM has highlighted the benefits offered by European banks for these assets, which, "despite being close to maximums, the margins of European banks are currently very attractive and give a boost to the sector's profits."
Evangelisti himself has pointed out that, within the fixed income universe, CoCos have suffered greater selling pressure than other instruments, which translated into worse performance compared to Tier 2 and senior bank bonds.
However, he has maintained that CoCos continue to constitute an "attractive investment opportunity" due to "their high dose of carry, the high break-even point of recent issues and the possibility of further narrowing of spreads" to the point of approaching, or even be below the spreads of 'high yield' corporate bonds.
Bank of America (BofA) has expressed its doubts about the optimistic market sentiment, which foresees early and intense interest rate cuts by the main central banks, since "history suggests that the total negative impact of monetary tightening is yet to come."
The company has explained that the sharp tightening of credit conditions last year occurred earlier than the typical 18-month lag between monetary tightening and credit cycle weakness would have suggested, as exogenous factors such as fiscal flexibility mediated.
Therefore, the BofA has considered that, although recent signs of improvement in the credit cycle have fueled optimistic market sentiment, the hope of a positive turn in the credit cycle in the first half of this year "will be disappointed." ".