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Posted by on Jan 23, 2017 in Market Insight, Peritus Asset Management

High Yield Market: Upcoming Maturities

High Yield Market: Upcoming Maturities

By Heather Rupp, CFA, Director of Communications and Research Analyst for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (NYSE Arca: HYLD)   One thing we look at as a high yield bond investor is the amount of upcoming maturities, as it can be important as we think about both defaults and the supply of new bonds.  Below the amount of upcoming maturities are charted by year for by both bonds and loans.1 Focusing on the bond market, as we look at forward default expectations, upcoming maturities are certainly a consideration.  Very, very few bonds are actually taken out with cash at maturity.  Rather, companies look to issue new bonds or bank debt to refinance their existing debt prior to maturity which can be anywhere from a few months to years before the bonds mature.  The problem becomes that if the company is in a weak position and the market demand/interest is not there for them to refinance and repay their bonds, then a maturity can...

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Posted by on Jan 16, 2017 in Market Insight, Peritus Asset Management

The Year of Active Management

The Year of Active Management

By Heather Rupp, CFA, Director of Communications and Research Analyst for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (NYSE Arca: HYLD)   The Bank of America Merrill Lynch US High Yield Index currently carries a weighted average yield to worst of 5.9%, a yield to maturity of 6.3%, a spread to worst of 423 bps, an average coupon of 6.5%, and average price of $100.40.1  The Bloomberg Barclays High Yield index is virtually the same, currently also carrying a weighted average yield to worst of 5.9%, a yield to maturity of 6.3%, a spread to worst of 423 bps, an average coupon of 6.5%, and average price of $100.65.2  While you can’t technically “buy” an index, they do provide a snapshot of what the broad high yield market looks like.  However, digging down into the individual index constituents is even more telling of what sort of value is available in today’s market. If we look at the nearly 2,000 individual bond tranches in the Bank...

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Posted by on Jan 9, 2017 in Market Insight, Peritus Asset Management

The High Yield Bond Market:  2016 Review, 2017 Outlook

The High Yield Bond Market: 2016 Review, 2017 Outlook

By Heather Rupp, CFA, Director of Communications and Research Analyst for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (NYSE Arca: HYLD)   We entered 2016 coming off a tough year for the high yield market. The free fall in energy and other commodity prices over the course of 2015 not only caused a collapse in bonds in the energy and commodity sectors, but the pricing declines spread to the entire high yield market, as these two sectors together made up over 20% of the index going into that year, with energy alone about 18% of the index.1 Spreads and yields on the high yield market had widened from 373 bps and 4.9%, respectively, in mid-2014, prior to the energy rout, all the way to 706 bps and 8.7%, respectively, to close out 2015.2 We reached high of 897 bps on the spread and 10.1% on the yield-to-worst in mid-February 2016.3, and then saw a rebound in high yield as energy prices stabilized and market participants...

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Posted by on Jan 3, 2017 in Market Insight, Peritus Asset Management

Is There a Place for Fixed Income in 2017?

Is There a Place for Fixed Income in 2017?

By Heather Rupp, CFA, Director of Communications and Research Analyst for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (NYSE Arca: HYLD)   The widely-held assumption as we enter 2017 is that this will be the year we see the Fed take real action. While we aren’t convinced that longer term (5 and 10yr) Treasury rates move much further from where we are closed out the year given the global demographics and economic headwinds (see our piece, “The Election Impact on the High Yield Market: Rates and Regulations”), for those concerned about rates, is there a place for fixed income investing? We ended 2016 with the 5-year Treasury yield at 1.93% and the 10-year at 2.45%, but up a mere 20bps from where we ended 2015. However, over the course of the year, it was a wild ride for Treasuries. Yields fell as low as 0.94% on the 5-year and 1.37% on the 10-year in early July 2016 and spiked as high as 2.07% and 2.6%,...

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Posted by on Dec 23, 2016 in Market Insight, Peritus Asset Management

The Floating Rate Loan Market: More to Consider

The Floating Rate Loan Market: More to Consider

By Heather Rupp, CFA, Director of Communications and Research Analyst for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (NYSE Arca: HYLD)   For those concerned about interest rates rising, turning to the floating rate loan market may seem like it could be a great alternative.  Over the past few weeks, as we have seen the expectation for higher rates firmly take hold and a spike in Treasury yields, floating rate loans (also called leveraged loans) are once again becoming a popular trade.  We have seen substantial inflows into the asset class, with last week’s inflow among the largest on record, only slightly surpassed by the inflows we saw during the summer of 2013 “Taper Tantrum.”1  Investing in loans is a currently hot strategy and to some maybe even a no brainer—if rates go up, the coupon payment you get goes up so you can’t lose, right?  But of course, like most things in investing, it is not that simple.  We see a few challenges with...

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Posted by on Dec 6, 2016 in Market Insight, Peritus Asset Management

The Election Impact on High Yield: Rates and Regulation, High Yield in a Rising Rate Environment

The Election Impact on High Yield: Rates and Regulation, High Yield in a Rising Rate Environment

By Heather Rupp, CFA, Director of Communications and Research Analyst for Peritus Asset Management, Sub-Advisor of the AdvisorShares Peritus High Yield ETF (NYSE Arca: HYLD)   As we talked about last week, while the market seems to be jumping to the conclusion that infrastructure and other government spending and the benefit of lower taxes will drive growth and inflation, taking interest rates higher, we aren’t a believer that we will see dramatic move upward in rates from where we are now.  But while we are not a believer in a run in rates, let’s take that side of the trade for a minute.  For the sake of argument, let’s say the Fed raises the Fed Funds Rate 25bps in December and then does another 3, 25bps rate increases in 2017.  So now the Fed Funds Rate is up 1% and let’s assume over this year, Treasuries have increased 1% as well from the pre-election levels.  What would that mean for us in the high yield market?  First, we need...

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