Overall, while interest costs are expected to rise, we believe there are several factors that will help alleviate financial pressure put onto high yield issuers. Near-term maturities are only a small percentage of the overall index, and the number of distressed credits within that cohort are manageable. Companies have also been able to reduce debt levels, shore up balance sheets, and should continue to use inventive financing techniques like collateralized lending to reduce borrowing costs. These factors lead us to believe that high yield is well positioned to weather the higher interest rate environment and continue to deliver strong relative performance going forward.
Endnotes
1 Source: Moody’s, Trends global default report, March 2024.
2 Source: Bank of America Global Research. High Yield Strategy: Tear Down This Wall as of 22 March 2024.
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