High yield CDS: A defence against rate rises?

To circumvent the interest rate and the liquidity risks in high yield, Olivier Debat, senior investment specialist, global & absolute return fixed income, at Union Bancaire Privee, looks at if CDS indices are the answer

Growth in the USA was disappointing in the first quarter of 2015 but is set to rebound in the next quarters at a moderate 2.5% annualised pace. In contrast, the eurozone surprised on the upside and eventually showed some signs of life. Growth would stay at low levels in the euro area, with no recessionary risks in the foreseeable future. One key supportive factor to growth is the lower oil price. Despite the recent rebound, oil trades 45% lower in dollars and 33% lower in euros than at its peak. This low- to moderate-growth environment is supportive of high yield. Since 2010, growth in t...