Indices of high-yield bonds and speculative-grade loans are showing growing investor confidence. While corporate defaults rose modestly in 2023, there is a general sense that many investment portfolios are in a good place.
Goldman Sachs’ head of global credit and acquisition finance, Christina Minnis, has referred to a rebirth in demand for riskier company debt as the cost of capital reverts to more acceptable levels.
The evidence backs this up. Janus Henderson Investor’s latest credit-risk monitor report states that US companies are finding it easier to refinance in capital markets as declining inflation and expectations of rate cuts allow yields to come down, despite bank lending standards remaining tight by historic standards.
January issuance was dominated by the automotive, utility and real-estate sectors, with a good mix of senior and hybrid bonds. On the back of lower issuance yields, it is particularly noteworthy that the real-estate market has become more active again, suggests Douwe van Duijvendijk, head of northern Europe corporate debt capital markets at ING.
“It is not that we necessarily expect the second half of the year to be materially worse, but geopolitical risks remain elevated.
