Global High Yield Bonds

Last week there was a rare occurrence in the high yield market as German airline Lufthansa announced it would be deferring the coupon on a hybrid bond issued in 2015.

In TwentyFour's Multi-Sector Bond update on Thursday 13th May 2021, Partner & Portfolio Manager Eoin Walsh provided an update on investment themes and positioning in the fixed income market.

George Curtis discusses how credit markets have performed in Q1 2021 and provides his outlook for the year ahead.

Primary deals launched in the European high yield market over the last two weeks have been diverse, and at times opportunistic.

The last few weeks has seen healthy issuance in the high yield space, including multiple billion pound deals, the most recent of which, Asda, priced on Wednesday. This was an interesting deal for a few reasons, not least because it is the largest sterling high yield deal of all time

Ultimately, the fact that the Klockner deal is not marketed as a green loan but still includes ESG-related covenants is proof that ESG needs to be integrated into an investor’s credit work as a matter of course, something we have been arguing for years.

We think it is indeed time to begin the search for recovery stories and deleveraging credits in sectors where the execution strategy is likely to succeed.

We think this current pause in the global rally is healthy and gives investors a rare moment to reassess, but from a fixed income credit point of view we would not expect too much of a dip.

In our view the rationale for the premium is certainly weakening and, of course, we can no longer call it a ‘Brexit’ premium.

George Curtis discusses credit markets in Q4 2020 and provides his outlook for the year ahead

For high yield issuers 2021 has started in a similar vein to 2020, with the technical backdrop providing an attractive environment for capital raising.

At the moment CLO spreads are tightening, as they are right across credit. However, we haven’t had any CLO primary deals come to market so far in 2021, so we are operating in a bit of an informational vacuum, at which point these cross-asset class comparisons can be useful.