January 20, 2023

Guggenheim First Quarter 2023 High-Yield and Bank Loan Outlook: 2023 Credit Outlook and Lessons Learned from a Tough Year

NEW YORK, NY – Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, today provided its First Quarter 2023 High-Yield and Bank Loan Outlook. Titled “2023 Credit Outlook and Lessons Learned from a Tough Year,” the report discusses why we believe many of the market developments that characterized 2022 will flip in 2023.

Among the highlights in the 16-page report:

• High-yield bond and bank loan sectors delivered positive total returns of 4.0 percent and 2.3 percent, respectively, in the fourth quarter of 2022, with bond performance boosted by a decline in Treasury yields.¹
• Strong corporate earnings growth drove a decline in leverage ratios to below pre-COVID levels and supported high interest coverage despite the increase in borrowing costs.
• Potentially heading into a downturn this year, we believe borrowers have healthier balance sheets than they did going into the pandemic.
• As the economic data deteriorate further, however, we expect a decline in corporate earnings, more negative rating migration, and an increase in default activity.
• We are also more cautiously positioned given the Federal Reserve’s ongoing fight to ensure inflation comes down and stays down, and its apparent willingness to topple the economy into a recession to succeed.
• Between the two sectors we prefer high-yield corporate bonds over bank loans this year from a total return perspective given the sector’s better credit profile and if, as we expect, rate duration cushions performance in a recession.
• For both sectors, however, we remain cautious and remain focused on finding value in higher quality structures and issuers.

For more information, please visit www.guggenheiminvestments.com.

About Guggenheim Investments

Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with more than $217 billion² in total assets across fixed income, equity, and alternative strategies. We focus on the return and risk needs of insurance companies, corporate and public pension funds, sovereign wealth funds, endowments and foundations, consultants, wealth managers, and high-net-worth investors. Our 250+ investment professionals perform rigorous research to understand market trends and identify undervalued opportunities in areas that are often complex and underfollowed. This approach to investment management has enabled us to deliver innovative strategies providing diversification opportunities and attractive long-term results.

 

Media Contact

Gerard Carney
Guggenheim Partners
310.871.9208
Gerard.Carney@guggenheimpartners.com

 

1. Source: ICE BofA High-Yield Index, Credit Suisse Leveraged Loan Index. 2. Guggenheim Investments assets under management are as of 12.31.2022 and include leverage of $15.2bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, , Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management.

Investing involves risk, including the possible loss of principal. Investments in fixed-income instruments are subject to the possibility that interest rates could rise, causing their values to decline. High yield and unrated debt securities are at a greater risk of default than investment grade bonds and may be less liquid, which may increase volatility. Investors in asset-backed securities, including mortgage-backed securities and collateralized loan obligations (“CLOs”), generally receive payments that are part interest and part return of principal. These payments may vary based on the rate loans are repaid. Some asset-backed securities may have structures that make their reaction to interest rates and other factors difficult to predict, making their prices volatile and they are subject to liquidity and valuation risk. CLOs bear similar risks to investing in loans directly, such as credit, interest rate, counterparty, prepayment, liquidity, and valuation risks. Loans are often below investment grade, may be unrated, and typically offer a fixed or floating interest rate.

This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy, or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC, or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.

55646