MyStratWeekly – September 26th 2023

Topic of the week: High yield: defying the odds

• European high yield has overperformed this year in the context of sluggish growth in the euro area and ECB tightening;
• Negative net bond issuance has been supportive of the asset class and high yield ETF inflows have been strong throughout August;
• The credit quality remains rather strong with low default rates and rising stars outnumbering fallen angels so far this year;
• Valuations however point to some widening risk. The single-B bucket performed beyond expectations;
• Given rich valuations after a sharp compression move, euro high yield could reprice wider over the months to come.

Market review: The Fed makes a statement

• Fed rates to stay higher for longer;
• US T-note yields near 4.50%;
• BoE opts for status quo, UK Gilts outperform;
• Growth stocks take a hit from higher yields.

Axel Botte's podcast

• Topic of the Week: Central Banks (Fed, BoE, BoJ) are in the news;
• Theme: The high yield market.

Chart of the week

Comments: China has become the world's creditor, particularly towards poor countries. $500 billion in projects have been funded since 2008.

Most of these loans have reached maturity. However, since 2017 the number of loans has slowed down. Between 2020 and 2021, the amount of loans fell by 40%, reflecting the insolvency situation of many countries linked to the Covid pandemic.