UBS maintains a neutral preference for High Yield bonds, citing resilient fundamentals and tight spreads that shift the return profile toward carry over spread compression.
Key Takeaways
- 1.UBS maintains a Neutral recommendation on high yield (HY) bonds as spreads have retraced to pre-conflict levels.
- 2.Fundamentals remain solid with conservative balance sheets, low leverage (4.5x in US HY), and high interest coverage.
- 3.Default rates are expected to remain low, around 2% over the next 12 months for both US and Euro HY markets.
Table of Contents
- Central scenario
- Global Asset Class Preference Neutral
- Upside scenario
- Downside scenario
- Global asset class preferences definitions
- Appendix
- Risk Information
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Authors
Frederick MellorsAntoine GeillerCarolina Corvalan
Securities
ICE BofA US High Yield IndexICE BofA Euro High Yield Index
Themes
Geopolitical Impact on CreditAI and Technological Change in Credit MarketsRefinancing and Maturity Walls
Regions
North AmericaEuropeMiddle EastUnited StatesIran