Consequently, investors are now focusing back on growth and the U.S. economy.
“We continue to expect the high-yield market to outperform investment-grade for the remainder of the year,” David Sekera, corporate bond strategist at Morningstar, said. “Based on our expectation that GDP growth in 2015 will range between 2.0 percent and 2.5 percent, macroeconomic fundamentals in the United States should be generally supportive of credit risk and dampen defaults through the rest of the year. The combination of modest economic growth and low interest rates should keep default rates from rising meaningfully this year.”
Some others have also warned of higher default rates later on, but risks are manageable. According to Dan Roberts, Head of Global Fixed Income at MacKay Shields, believes default rates will rise to 2.75% this year, with highly levered energy production operators in shale formations most likely at risk in the event of continued oil price pressures.
For more information on speculative-grade debt, visit our junk bonds category.
Max Chen contributed to this article.