January 29 2014
Despite the increased risks permeating the market as discussed in detail in this piece, we believe that 2014 will likely see positive returns for U.S. leveraged credit. With an improving economy and very few potential catalysts for widespread corporate defaults, we think that investors will once again be able to capture most, if not all, of the market's coupon while not suffering significant price degradation from rising interest rates and credit losses. At the same time, given the late credit cycle behavior we have witnessed, we believe that successful investors will need to be highly discerning in their credit selection process in order to find both issuers with resilient corporate cash flow streams as well as debt instruments that are well-positioned to withstand an uptick in rates. This all assumes, of course, that the Fed avoids tripping up the markets again with its "tales of tapering."
To read the complete piece written by David Breazzano, click here.