Decreasing uncertainty is bullish for high yield bonds. At least that’s the message from Credit Suisse analysts who expect a resolution on the fiscal cliff to ignite a year-end rally in high-yield:
“While US fiscal cliff concerns have recently weighed on the performance of corporate bonds, especially on US credits, we are reasonably optimistic that a pragmatic solution can be found. A resolution would remove uncertainty and thus push benchmark bond yields up, and provide support to credit markets. In the same way, we expect an agreement on the next disbursement of funds to Greece to be credit supportive. Furthermore, we do not expect Moody’s rating downgrade of France’s credit rating to Aa1 to have a significant market impact. We keep our positive stance on high yield bonds, with investors likely to continue trading down the credit curve due to the extremely low yield environment.”
Source: Credit Suisse
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