Guggenheim First Quarter 2025 High Yield and Bank Loan Outlook: Reframing Tight Spreads in Leveraged Credit

Adjusting spreads for fundamental factors.

/EIN News/ -- NEW YORK, Feb. 19, 2025 (GLOBE NEWSWIRE) -- Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, today released its first quarter High Yield and Bank Loan Outlook. “Reframing Tight Spreads in Leveraged Credit,” examines the outlook for high yield corporate bonds and leveraged loans in an economic environment that is supportive but marked by policy uncertainty.

Key takeaways:

• The leveraged credit market delivered strong returns in 2024, reflecting a solid economy and robust investor demand for fixed income.
• High yield spreads and leveraged loan discount margins tightened by the end of the year.
• Both fundamental and technical factors are supporting currently tight index spreads. And after adjusting for fundamental factors like leverage and interest coverage, high yield credit spreads appear cheaper compared to historical levels.
• Moreover, the high yield bond market is comprised of higher quality issuers than a decade ago, revealing greater value and presenting carry opportunities.
• Repricing activity should moderate leveraged loan defaults, supporting modestly tighter discount margins.
• We anticipate modest normalization in high yield credit spreads this year, contingent on continued economic growth.
• Solid U.S. growth and moderate inflation should support credit markets in 2025, creating a stable environment for high yield bonds and leveraged loans.
• Historically elevated yield levels are likely to continue to attract investors, maintaining a favorable supply/demand dynamic in credit markets.

For more information, please visit http://www.guggenheiminvestments.com.

About Guggenheim Investments

Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with more than $243 billion¹ in total assets across fixed income, equity, and alternative strategies. We focus on the return and risk needs of insurance companies, corporate and public pension funds, sovereign wealth funds, endowments and foundations, consultants, wealth managers, and high-net-worth investors. Our 220+ investment professionals perform rigorous research to understand market trends and identify undervalued opportunities in areas that are often complex and underfollowed. This approach to investment management has enabled us to deliver innovative strategies providing diversification opportunities and attractive long-term results.

1. Assets under management are as of 12.31.2024 and include leverage of $14.8bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Private Investments, LLC, Guggenheim Wealth Solutions, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, and GS GAMMA Advisors, LLC.

Investing involves risk, including the possible loss of principal. In general, the value of a fixed-income security falls when interest rates rise and rises when interest rates fall. Longer term bonds are more sensitive to interest rate changes and subject to greater volatility than those with shorter maturities. During periods of declining rates, the interest rates on floating rate securities generally reset downward and their value is unlikely to rise to the same extent as comparable fixed rate securities.  High yield and unrated debt securities are at a greater risk of default than investment grade bonds and may be less liquid, which may increase volatility. Investors in asset-backed securities, including mortgage-backed securities and collateralized loan obligations (“CLOs”), generally receive payments that are part interest and part return of principal. These payments may vary based on the rate loans are repaid. Some asset-backed securities may have structures that make their reaction to interest rates and other factors difficult to predict, making their prices volatile and they are subject to liquidity and valuation risk. CLOs bear similar risks to investing in loans directly, such as credit, interest rate, counterparty, prepayment, liquidity, and valuation risks. Loans are often below investment grade, may be unrated, and typically offer a fixed or floating interest rate.

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This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC, or its subsidiaries. The opinions contained herein are subject to change without notice. Forward-looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.

Media Contact
Gerard Carney
Guggenheim Partners
310.871.9208
Gerard.Carney@guggenheimpartners.com