Search this website. You can use fund codes to locate specific funds

Weekly Credit Insight

Chart of the week: healthy flows into high-yield credit

As markets normalise, valuations are supporting a higher allocation to high-yield credit. This is in part due to increased savings and the involvement of central banks in fixed-income markets, which has boosted flows into spread products. Within high yield, strong valuations and fundamentals mean that the BB-rated segment looks the most attractive from a top-down perspective (see figure 1).

Figure 1. BB-rated credit looks appealing

Source: ICE Bond Indices, Federated Hermes, as at July 2020.

Earnings season should also pick up steam this week, as investors anticipate more information on full-year earnings expectations and how business models can adapt to the post-coronavirus world.

Like last quarter, we are likely to see increased dispersion as higher-rated companies are better able to preserve cash by cost cutting and reducing shareholder distributions. While there should be a small uptick in downgrades in response to weaker earnings, the magnitude of downgrades recorded year-to-date mean the volume should be underwhelming. 

More Insights

The Meeting Room Webcast: Global Emerging Markets, May 2021
As we navigate the ever-changing landscape of the coronavirus, the Global Emerging Markets team reflect on recent performance, and discuss the outlook for Global Emerging Markets from both a market and portfolio positioning perspective.
Global Emerging Markets positive impact case study: Richter Gedeon Nyrt
Richter's contribution to Target 3.8 of the UN SDGs is particularly meaningful.
The future of the office: An ESG issue too
Flexible working can enhance employee satisfaction, productivity and the long-term value of companies.
Car makers under scrutiny in EOS’s Q1 Public Engagement Report
Why car makers need to accelerate their transition to electric vehicles
Five key themes in energy credit
Here we present our reflections on investing in energy credit so far this year.
Doomsday at the bank: a spoonful of measures helps the resolution go down
The global financial crisis proved bank failure was not just ancient history or fictional fodder.