Corporate health is looking brighter and brighter, according to Loomis Sayles’ Credit Analyst Diffusion Indices (CANDIs).[i] For the first time in several quarters, our analysts expect the aggregated corporate credit outlook to trend higher. Together with continued positive trends in other key measures like profit margins and pricing power, the March CANDIs suggest there is still gas left in the tank to fuel further earnings expansion, and a broad-based economic downturn has likely been pushed out on the horizon.       About the CANDIs Once a quarter, we survey Loomis Sayle ..read more

The 2-year Treasury yield shot up 23 basis points April 10 after another higher-than-expected inflation print. An increase of that magnitude has only happened 13 times since the year 2000–a period of nearly 9,000 days. The Fed’s forward path is hardly certain, but for now, the market has ratcheted down and pushed out rate cut expectations. We think it is an opportune time to consider cash flow generating strategies that can capitalize on the currently higher yield levels to address near-term liquidity needs. Nobody Wants to be a Forced Seller A cash flow generating portfolio can look very simi ..read more

It has been four years since the World Health Organization declared COVID-19 a pandemic and the world shut down. The spring of 2020 was a period of incredible uncertainty for hospitals across the United States as they scrambled to adapt to new protocols and immense operating and financial pressures while treating the first of many waves of COVID patients. It was the start of a turbulent period for nonprofit hospitals, and while the sector is more stable today, we think some providers have emerged in a much stronger position than others. Read on for the lessons we’ve learned from the previous f ..read more

US rates grinded higher at the beginning of 2024 as the economy continued to prove resilient. Stronger-than-expected economic data, plus a Consumer Price Index (CPI) surprise, could point to a higher-for-longer outcome, in our view. The market’s anticipation for rate cuts has moderated with recent data and Federal Reserve (Fed) commentary. While Fed Chair Jerome Powell signaled that progress is being made on inflation and rate cuts are next, he did not endorse March as the date for the first cut. Rather, he emphasized that the committee needs to see additional progress—even though three- and s ..read more

Despite macro headwinds in 2023, emerging market (EM) debt performance was strong. How do you explain it?                                                                                                    EM asset classes did end up having a good year in 2023 in general. I would even suggest that during the year, there was a noticeable shift away f ..read more

1. In August 2023, you talked about the demand void left in the agency MBS market after some of its largest buyers moved to the sidelines. Do you expect agency MBS demand concerns to linger in 2024?                                                                                                    We see potential for the technical backdrop to impro ..read more

Throughout 2023, our analysts opined on risks related to commercial real estate (CRE) and their lenders. There was plenty to say about these sectors amid high vacancy rates, rising inflation rates, higher interest rates and the failure of three mid-size US banks and one large foreign bank—circumstances that left many investors holding their breath and wondering if there would be another shoe to drop. In the following Q&A, two seasoned investment professionals, Stephen L’Heureux, a global commercial real estate portfolio manager and CMBS strategist, and Julian Wellesley, a senior bank cre ..read more

Markets appear to be priced for a soft landing in the United States, but plenty of economic and geopolitical wild cards remain on the table. Click the image below to learn how our investors are thinking about credit markets, opportunities and risks in the year ahead. MALR032519 ..read more

1. What’s your overall view of the investment grade (IG) credit market? We believe IG corporate fundamentals are largely stable based on our bottom-up research. US large-cap company earnings recently turned positive after three straight quarters of negative growth. We think margins and free cash flow can remain relatively stable over the next several quarters, and corporate balance sheets look healthy. We are keeping an eye on recent deterioration in interest coverage, which has declined with the dramatic increase in interest expense over the past year. According to JP Morgan, interest expense ..read more

1. What’s your view of the fundamentals and valuations in euro investment grade (IG) credit? The fundamental picture in euro IG credit is notably weaker than US IG credit. On balance, we see a slight deteriorating trend in euro IG credit quality. Margins have come down significantly, driven by weakness in industrial and commodity sectors. On the positive side, leverage has remained relatively well behaved despite the weakening earnings trend. We think companies in more defensive sectors like telecommunications, healthcare and pharmaceuticals will continue to do fine. We also see potential oppo ..read more