GLOBAL - AXA Investment Managers believes that after the disappointment of 2001 the high-yield bond market is poised to enter a recovery stage with stimulating returns expected in 2002.
This outlook is founded upon the view that 2002 looks set to be the year of the bull in the US and UK, and investors are increasingly optimistic about Europe.
As the high-yield bond market is a close relative of equity markets any possible enthusiasm for equities should impact positively on high-yield bonds. Indeed, high-yield bonds could conceivably outperform equities and at a lower risk.
Commenting on the outlook for the high-yield bond market, Ashley Goldblatt, UK director of fixed interest at AXA Investment Managers, said: “There are precedents to lend credibility to our view that the high-yield market is set to have a good year.
“We await final data, but the indications are that the corporate default rate in 2001 will be around 10% and 2002 may not be significantly different. This default rate does not look promising but look back to the negative returns made in the high-yield market in 1990 and examine the gains made in the following year - also a poor year for defaults - as the market anticipated recovery, evidenced by the noticeably lower default rate in 1992.”
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