Norway

Institutional Investor
Investment Professional
Individual Investor
The Norway website is not available. You will be redirected to the Luxembourg website which contains funds approved for marketing in Luxembourg, and where several of these funds are not registered for marketing in Norway.

Norges nettside er ikke tilgjengelig. Du vil bli omdirigert til Luxembourg-nettstedet som inneholder midler godkjent for markedsføring i Luxembourg, og hvor flere av disse fondene ikke er registrert for markedsføring i Norge.

Being Selective in High-Yield Credit Can Help Multi-Asset Strategies

09 March 2022

2 min read

Wider Spreads and Strong Fundamentals Form a Favorable High-Yield Credit Climate

High-yield credit spreads vs. US Treasuries now hover at 360 basis points, well above their 5-year average of 350.

Historical analysis does not guarantee future results.
Interest coverage ratio measures a company’s earnings relative to the interest owed on debt.
High-yield credit spreads through February 28, 2022; interest coverage through January 31, 2022
Source: J.P. Morgan, Markit CDX North America High Yield Index and AllianceBernstein (AB)

Historically low interest rates have left investors with fewer fixed-income options to bolster portfolio yield. We think high-yield bonds—issuers rated BB or below—have become more attractive recently. High-yield spreads compared to US Treasuries are much wider than they were for most of 2021 and are now above the five-year average of 350 basis points.

Historically, when high-yield spreads widen, it signals a broad deterioration in company fundamentals. But now, post-pandemic global inflationary pressures, looming US interest-rate hikes and, most recently, geopolitical tensions in Europe are behind the trend—not credit deterioration.

In these new conditions, the high-yield credit market now offers much better risk-reward potential—if you’re selective.

Although valuations are still modestly expensive compared with historical averages, fundamentals for high-yield bond issuers are also strong. Many companies took advantage of low rates in 2021 to refinance their debt and shore up balance sheets. The high-yield market looks particularly healthy in the US, where default rates remain low and interest coverage—a company’s earnings relative to the interest owed on debt—is well above its five-year average.

Of course, not all high-yield issuers fit these criteria, so investors need to stay diligent in their fundamental research and issuer selection. But with an average yield of around 6% and a strong fundamentals foundation that may help limit downside risk, we believe that high-yield bonds present an attractive risk-reward proposition for a diversified multi-asset portfolio.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

This is a marketing communication. This information is provided by AllianceBernstein (Luxembourg) S.à r.l. Société à responsabilité limitée, R.C.S. Luxembourg B 34 305, 2-4, rue Eugène Ruppert, L-2453 Luxembourg. Authorised in Luxembourg and regulated by the Commission de Surveillance du Secteur Financier (CSSF). It is provided for informational purposes only and does not constitute investment advice or an invitation to purchase any security or other investment. The views and opinions expressed are based on our internal forecasts and should not be relied upon as an indication of future market performance. The value of investments in any of the Funds can go down as well as up and investors may not get back the full amount invested. Past performance does not guarantee future results.

This information is directed at Professional Clients only and is not intended for public use.