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Posted by on Oct 11, 2016 in Market Insight, Peritus Asset Management

Investing by Duration

Investing by Duration

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)   With all of the talk of the Federal Reserve taking action and raising rates in the next couple months, investors naturally are considering how they position their portfolios. Duration is one metric fixed income investors often pay attention to as they assess a potential interest rate impact.  Duration is a measure of interest rate sensitivity (the percentage change in the price of a bond for a 100 basis point move in rates), so the lower the duration the theoretically less sensitive that bond/portfolio is to interest rate movements. By the nature of the shorter maturities and higher yields, the high yield bond market generally has a shorter duration than investment grade and municipal bonds, meaning high yield bonds are less sensitive to interest rate moves. Yet even within the high yield bond market we are seeing some products and vehicles with a lower...

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Posted by on Sep 28, 2016 in Market Insight, Peritus Asset Management

High Yield Market Conditions

High Yield Market Conditions

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 all know, the Fed held rates steady last week and while they kept the door open for a December rate hike, they certainly didn’t indicate it is a foregone conclusion.  There are a number of important data points to watch over the coming months, not to mention an important election, which may well impact the outlook for markets and rates.  So just how is the high yield market positioned in this environment? First, we believe that that high yield market remains an attractive area for investors looking for income and yield.  While we have seen strong performance for high yield so far this year and spreads come in from the 2016 lows, we still see value here and further room for spread tightening.  As we argued at the time, the decline in high yield that we saw in late 2015 and...

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Posted by on Sep 16, 2016 in Market Insight, Peritus Asset Management

What We Know

What We Know

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)   All eyes are on September 21st.  Just over a week or so ago, people seemed to feel a September rate hike was unlikely, now over the course of a week and a bit of hawkish Fed-speak, many now seem to believe September may actually be in the cards.  On Friday we saw security prices fall across the board, with both risk assets and Treasuries taking a hit. Financial markets across the world have been taking their cues from central banks for years now, and last week was just another example.  Over the week, the ECB (European Central Bank) decided they would not take further easing measures at this time.  We know the Federal Reserve wants to at some point begin raising rates, thought timing uncertain.  What happens if the Federal Funds Rate increases 25bps or even 50bps over the next six months?  Do...

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Posted by on Aug 16, 2016 in Market Insight, Peritus Asset Management

The US Fixed Income Market

The US Fixed Income Market

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 U.S. fixed income market is massive at around $40 trillion.1 The largest subcategory is U.S. Treasury debt.  Mortgages represent the second largest single subcategory of the bond market; this helps to explain why problems in the mortgage market nearly took down the entire financial system in 2008.  Yet, a sizable 22% of the fixed income universe is represented by “corporate credit” through leveraged (floating rate bank) loans, high yield bonds and investment grade corporate bonds, together making this category even larger than the mortgage market.     What comes as a surprise to many investors is that the non-investment grade sector of loans and bonds has grown to become a major asset class itself, now over $2.5 trillion.  By looking at the chart above, it is obvious that corporate credit plays a major role in financial markets and high yield bonds and floating...

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Posted by on Aug 10, 2016 in Market Insight, Peritus Asset Management

Loans: The Floating Rate

Loans: The Floating Rate

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 have previously noted (see our piece “Today’s Floating Rate Loan Market”), we see investing in the loan market as predominantly a way to expand our investment universe.  Again, high yield debt issuers have the option to issue bonds, loans, or both.  We see cases where companies take out bonds with loans or vice versa, take out loans with bonds, so by having the option to include both, investors are able to access companies with attractive metrics and yield no matter the security, and in cases where a company issues both bonds and loans, loans are secured and rank higher the company’s capital structure so can allow for the ability to invest in a lower levered piece of the capital structure. However many see loans primarily as a way to reduce your interest rate risk.  Yes, loans are floating rate securities and...

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Posted by on Aug 3, 2016 in Market Insight, Peritus Asset Management

Today’s Floating Rate Loan Market

Today’s Floating Rate Loan Market

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 are high yield debt investors.  While our focus over the decades has been on investing in high yield bonds, we also do allocate a portion of our portfolio to floating rate bank loans.  We see the inclusion of loans primarily as a way to expand our investment universe.  When a high yield issuer comes to market, they have the option of issuing loans or bonds or both.  In some cases a company may elect to issue only loans.  For instance, over the years we have seen many of the companies that we hold bonds in decide to take out the bonds with a loan, leaving loans as the only option in the capital structure.  Having the ability to invest in loans enables us to continue investing in a company that we like and accessing companies that are loan-only issuers. Including loans in...

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