High yield: Credit risk must return to top priority

The credit cycle is in the expansionary phase - typically when companies dabble in a little more financial engineering. Credit risk must return to top priority, argues Matt Eagan from Loomis Sayles.

The high yield market has continued to enjoy a favourable backdrop of stable credit fundamentals, improving economic conditions, easy monetary policy, and a seemingly voracious appetite for yield from global investors. The sector has shrugged off various geopolitical concerns and the occasional jaw-boning from Federal Reserve officials. The resiliency of the market reflects the solid underlying fundamentals. Corporate profits are strong, leverage is manageable, and defaults are low. Adding the global scramble for yield in to the mix, and it is easy to see why high yield spreads have been...