CS: Fiscal Cliff Resolution Will Benefit High Yield Bonds

Decreasing uncertainty is bullish for high yield bonds.  At least that’s the message from Credit Suisse analysts who expect a resolution on the fiscal cliff to ignite a year-end rally in high-yield:

“While US fiscal cliff concerns have recently weighed on the performance of corporate bonds, especially on US credits, we are reasonably optimistic that a pragmatic solution can be found. A resolution would remove uncertainty and thus push benchmark bond yields up, and provide support to credit markets. In the same way, we expect an agreement on the next disbursement of funds to Greece to be credit supportive. Furthermore, we do not expect Moody’s rating downgrade of France’s credit rating to Aa1 to have a significant market impact. We keep our positive stance on high yield bonds, with investors likely to continue trading down the credit curve due to the extremely low yield environment.”

Source: Credit Suisse

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

More Posts - Website

Follow Me:
TwitterLinkedIn

Comments

  1. Cullen when you post a piece like this can we assume you generally agree with thesis (or do you sometimes post writings that don’t agree with your general view but still raise a compelling case)?

  2. I will be utterly amazed if a negotiated solution to the “fiscal cliff” is found before Jan 1, or ever. Both political parties want to go cliff diving for different reasons. Obama’s leverage increases greatly once the pre-Bush tax rates return. The Republicans want Obama’s second term to be a maximal disaster, but they can’t be too obvious about it, so they go through the motions of negotiating. And the Democrats want to House GOP to take the blame for a return of the Depression so they can win back the House in 2014, and they know that having the MSM on their side is a huge advantage in assigning blame.

    A good depiction of the “fiscal cliff” is right here
    http://www.zerohedge.com/contributed/2012-11-19/fiscal-cliffcont