By Ivan Rudolph-Shabinsky (pictured) and Petter Stensland
A surge in capital expenditures and leverage in the energy industry could end badly for some companies and their creditors. While select opportunities exist, we think bond investors should think carefully before they blindly bankroll today’s North American energy revolution.
If you’re worried about the recent spike in bond market volatility, we’ve got a bit of advice: Don’t be. There are plenty of other risks—chiefly credit quality and flatter yield curves—that are causing shakeups in some corners of the fixed-income world. Happily, there are things you can do about them. (more…)
US interest rates are likely to head up gradually over the next several years, now that the long tailwind from a three-decade-long rate decline has subsided. With bonds still an important part of many portfolios, what should investors be thinking about?
To protect their portfolios from rising interest rates and volatility, many high-yield investors have headed for short-duration strategies. We think some of the more popular approaches may expose investors to bigger hazards than they realize.
High-yield bonds’ attractive income has made them popular in today’s low-rate environment. But market complacency has caused callable-bond investors to ignore a lurking risk: duration extension in a rising-rate scenario.
Chasing returns into—and out of—specific credit sectors happens so often in bond markets that it hardly rates a raised eyebrow. But running with the herd can be risky, which is probably why Federal Reserve officials reportedly have discussed slapping exit fees on bond funds to avoid a disorderly rush to the exit. (more…)
In early 2013, we urged investors to take a hard look at the interest-rate risk in their bond portfolios. If they didn’t do it then, they have a chance to do it now. (more…)
This year’s leveraged buyouts (LBOs) are being financed with more debt and include fewer protections for creditors. Regulators, the press and market participants are watching this closely, and so are we. But we don’t think it’s worth losing sleep over—at least not yet.
Posted by Gershon Distenfeld (pictured) and Ivan Rudolph-Shabinsky of AllianceBernstein (NYSE: AB)
Many investors have taken on more risk in their quest for higher returns—especially as signs have pointed to interest rates staying stable until next year. But two key elements are often overlooked: default risk and underwriting standards.