He high yield This is the category of debt that will bring the most profits to the investor in 2024. Global high yield bonds have appreciated 8.7% since the start of the yearas shown by the Bloomberg Global High Yield Index. This high contrasts with the timid 0.5% that its counterpart increases for “standard” debt (the Bloomberg Global Aggregate, representative of a basket of investment grade global debt).
Regarding the high yield, It’s not just the global system that does it well. This is the most optimistic category of the year, but The second segment that does it best is high yield pan-European, which obtains 7.6%. And the third category which increases the most, high yield American company. The yields offered by these bonds to maturity exceed 7% in the case of global and US bonds, and exceed 6% for pan-European bonds.
It is clear that those who are familiarly called junk bonds They are doing better than the others in 2024. This type of debt, which we will not see in the most conservative portfolios, returns more to investors due to its higher risk of default compared to the investment grade (since its issuers are more vulnerable companies). . Now: with everything, these obligations have already accrued Does the investor who has had them in his portfolio for months have reasons to keep them, or is it time to move towards other assets? Among experts, opinions vary. and in On the market, there are, within the reach of individuals, funds focused both on this debt and on the investment category.which achieve increases of up to nearly 13%, the first, and 9%, the second.
Antonio Aspas, partner and advisor of Buy & Hold, emphasizes that “the high yield historically, it gives a little more profitability than investment grade, but with greater volatility. But right now, the truth is that the index risk premium high yield [la rentabilidad extra que ofrecen respecto a los bonos soberanos] is at the lower end of the historical range.” This premium averaged about 4 percentage points, and now we are close to 3%; “At times when there was less fear in the market, the differential has fallen to 2.6 points, and in times of stress this can easily go up to 6 percentage points,” says Aspas.
Víctor Alvargonzález (Nextep Finance) “We consider “high yield” more appropriate for the United States than for Europe”
By sector, in all sectors, the gaps are already “fairly tight”; The oil sector offers a little more profitability because it is exposed to greater risk, but the banking sector, which is the most relevant in this type of debt, does not offer a great opportunity at the moment: “THE coconut [bonos contingentes convertibles]which until a few years ago easily earned you 5, 6 or 7 points more than a bonus senior of the same entity, “Now they are offering much less, between 3 and 4 points,” adds the Buy & Hold partner. This expert thus evokes the possibility of moving towards safer bonds.
“He high yield It is sold as fixed income, but in reality it is an intermediate asset between fixed income and variable income”, warns Víctor Alvargonzález, founding partner of Nextep Finance. “Although it is a bond, what you are investing in is the financial health of a company and its future. In a way, you’re betting on this company to maintain its payments, but there’s a problem: They’re risky companies,” he adds. 12-month Treasuries are about to lose 2.5% profitability.
What to do if you are already invested? It depends on the region. Defaults increase in a recession, which is why Alvargonzález considers it appropriate stay in the links high yield of the United States, “where the risk of recession is, for the moment, low or almost zero”. On the contrary, this risk is greater in Europe. “We consider that high performance is more appropriate in the United States, while in Europe you can obtain very good profitability with investment grade, and you run less risk”, summarizes Alvargonzález. In any case, the founder of Nextep Finance prefers, because he takes risks, variable income to high yield (no matter how good it performs this year, it is by no means increasing as much as the stock indices).
Less risk than the stock market
Not all voices are on the same wavelength. Erick Muller, head of product and investment strategy at independent manager Muzinich & Co, specializing in corporate fixed income, highlights the high yield and emerging debt as the great opportunities for 2025, since coupons remain high in an environment where the financial health of companies remains good. “Given the evolution of stock market valuations, corporate fixed income securities offer great attractiveness in exchange for much lower risk than variable income,” he defends. The company expects a sharp slowdown in growth which, for the moment, will not turn into a recession.
UBP is positive on credit, “as a world of strong nominal GDP growth will likely allow default rates to remain below 10%, where they have been for the past year.” Although concerns were expressed about refinancing risks in the high yield sector, these were reduced as companies were able to pay down debt and interest rates began to normalize to some extent. Hence the high yield be “an option to consider for inclusion in a portfolio”.
According to Roman Gaiser, Head of EMEA Fixed Income and High Yield at Columbia Threadneedle Investments, “following interest rate hikes by central banks in 2022 and 2023, fixed income has again collected interests with the high yield European like an attractive investment alternative with lower volatility than stockssomething to keep in mind after the recent sharp rise in stock markets and given the potential risk of an economic downturn “Over the past 20 years, the high yield Europe has outperformed other fixed income asset classes as well as equities over the long term, says Gaiser.
