Real Asset Debt
Why We Like Real Asset High Yield
Chart
Jun 12, 2023
In our January Real Assets Quarterly, we highlighted how we believe “debt is now attractive,” one of the five investment themes we see creating real asset opportunities in 2023. The chart above shows why we find debt, specifically real asset high yield, attractive today.
It depicts how real asset high-yield yields are currently high relative to history, at the same time that leverage levels in high yield are at decade lows, thanks to healthy corporate balance sheets. In addition, when excluding two outlying sectors (gaming and transportation) that continue to normalize post-pandemic, the chart shows how real asset high yield leverage appears even more favorable, sitting at its lowest level since JP Morgan started tracking this data in 2008.
The bottom line: We believe real asset high yield debt may be lower risk than its high yields imply, offering a potential opportunity for investors.
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Index Definitions
The ICE BofA U.S. High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.
Definition of Terms
Yield to Worst (YTW) s a measure of the lowest possible yield that can be received on a bond that fully operates within the terms of its contract without defaulting.
Leverage (LTM Debt/EBITDA) reflects debt in proportion to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) over the Last Twelve Months (LTM) .