Market overview

THE STARS ALIGN FOR HIGH YIELD FINANCIALS

Spotlight on the growth of global high yield financial bonds: yield you can ‘bank’ on.

 

A subset of the corporate high yield bond market - high yield bonds issued by financials sector companies, including contingent convertible bonds (CoCos), have become a stand-alone asset class in their own right.

 

In this paper, we explain the growth of this sector, why we believe an allocation to it may help diversify a fixed income portfolio and why we like its fundamental characteristics.

 

Driven by central banks and regulators, banks have greatly strengthened their capital and liquidity positions since the financial crisis of 2008-12.

 

Continuing stress tests - including a new 2019 liquidity stress test by the European Central Bank (ECB) — are focused on minimising bank failures in the next recession.

 

High yield financials sector bonds offer yields comparable with corporate high yield, with the added attraction of lower expected defaults in the next recession. 

 

Associated Funds

Name
Lyxor / Wells Capital Financial Credit Fund