Barclays raised its high-yield bond total return call to 6.5% to 7.5% from its previous 3.5% to 4.5% projection made at the end of November.
“We see more supportive technicals in place for high yield, with falling dependence on retail flows given our expectation of another year of shrinking new issue supply,” analysts led by Bradley Rogoff said in a recent report. The December slump was “more of a liquidity-driven event, as opposed to a more negative reassessment on growth and earnings prospects for the year ahead.”
JPMorgan Upgrades U.S. high-yield bond return expectations
JPMorgan also upgraded its U.S. high-yield bond return expectations to 8% from 3.3% at the end of November.
Additionally, the historically bearish Morgan Stanley even expects a better year for junk debt, lifting its high-yield total return forecast for 2019 to 4.5% from a 0.5% call previously. While analysts led by Adam Richmond warned that credit is in a long-term bear market, there are can still be pockets of “strong tactical rallies in between.”
“Our 2019 return forecasts are low, but marketing-to-market, the numbers look modestly better,” according to JPMorgan analysts.
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