Apr 19, 2021
Marcel Benjamin, Fixed Income Strategist with State Street Global Advisors SPDR ETF Fixed Income Group, joins to present a deep dive into the High Yield Fixed Income space. What makes a bond part of high yield? What are the risks with High Yield Bonds? How do the ratings differ across the spectrum? Plus, what makes a company a “Zombie Company”?
- • US What does it mean to be considered high yield?
- • Differences in companies who go from BBB to Junk.
- • CCC vs BB
- • Size of high yield market
- • Size of high yield market by rating
- • Risk of defaults historically
- • Defaults 2008 vs 2020/21 so far
- • Spreads widening vs narrowing.
- • Short duration high yield vs longer duration
- • Implied risk of default by yield spread.
- • Historical recovery rates
- • Brief explanation of default process for bonds
- • Zombie Companies
- • What are they (i.e., 3 years Operating Earnings < net interest payments?)
- • Interest coverage ratios
- • % of companies now vs historical considered zombies
- • How companies may recycle and roll debt upon maturity
Mentioned in this Episode:
Information on State Street Global Advisors SPDR fixed income products https://www.ssga.com/us/en/intermediary/etfs/capabilities/simplify-investing-with-fixed-income-etfs/sdpr-fixed-income-etfs
CCC High Yield Spread from Federal Reserve Bank of St. Louis (FRED) https://fred.stlouisfed.org/series/BAMLH0A3HYC
High Yield Spread from Federal Reserve Bank of St. Louis (FRED) https://fred.stlouisfed.org/series/BAMLH0A0HYM2
Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr