a few things about high yield you never knew (but were afraid to ask)
TRANSCRIPT
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
1/8
A Few Things You Should KnowAbout High Yield Bonds (but wereafraid to ask)
London: 16 High Holborn, WC1V 6BX Prague: Klimentska1216 / 46 110 29 Praha 1
T: +44 20 8616 7311 F: +44 20 8616 7499 T: +420 222 191 008 F: +420 222 19 1200
This publication has been prepared by Symfonie Capital (Symfonie) for information purposes only. It is not an offer or solicitation for the
purchase or sale of any financial instrument. Reasonable care has been taken to ensure that the information contained herein is not
untrue or misleading, but no representation is made as to its accuracy or completeness. The views and opinions expressed in thisdocument are those of its author(s) and do not necessarily reflect those of Symfonie. No reliance should be placed on this document for
the purposes of making an investment decision. Neither Symfonie, its officers, directors, nor the author(s) of this document accept
liability for any loss arising from any investor arising from any decision to rely on this document. Symfonie, its affiliates and any of its or
their officers may have financial interest in any transactions, securities or commodities referred to herein. Symfonie, or its affiliates, may
perform services, for, or solicit business from, any company referred to herein. This document is confidential and proprietary to
Symfonie. Transmission or publication of this document without the express prior consent of Symfonie is strictly prohibited. Symfonie
Capital reserves all legal rights in connection with the publication of this document. Symfonie Capital 2012.
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
2/8
Private and conditional. Unauthorised distribution strictly prohibited. 2012 Symfonie Capital LTD 2
High Yield Beats Equity in the Long Term
Between 1995 and2012 European HighYield returned 377%
while EuropeanEquities returned176%.
Between 1986 and2012 US High Yieldreturned 1040%while US Equities
returned 650%.Source: Bloomberg, CSFB, S&P 500, DowJones Stoxx 50
US High Yield vs. Equities
0
200
400600
800
1000
1200
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
1986 - 2012
Index198
6=100
High Yield Bonds Equities
European High Yield vs. Equities
0
100
200
300
400
500
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1995 - 2012
Index
199
5=
100
High Yield Bonds Equities
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
3/8
Private and conditional. Unauthorised distribution strictly prohibited. 2012 Symfonie Capital LTD 3
High Yield Offers Rewards
Source: Credit Suisse, Symfonie Capital, Data through 31 December 2009
High Yield and EM offersignificant yield premium to
BBB
Many BB and BBB EMcorporates have muchbetter credit metrics thanhigh yield counterparts, butoffer same or better yields
Good credit researchbrings rewards over
time.
Bond Spreads - Higher Rated
0
200
400
600
800
1000
1200
1400
2004
2005
2006
2007
2008
2009
2010
2011
2012
2004-2012
Sprea
dvs.
Benc
hmark
(b
p)
WE BBB BBB EM Corporates Split BBB HY
Bond Spreads - Lower Rated
0
500
1000
1500
2000
2500
3000
3500
4000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2004-2012
Sprea
dvs.
Benc
hmark
(bp
)
WE BB WE B EM BB EM B
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
4/8
Private and conditional. Unauthorised distribution strictly prohibited. 2012 Symfonie Capital LTD 4
High Yield is Less Volatile Than Equities
Source: Credit Suisse, Bloomberg, Symfonie Capital,, S&P 500
Since 1986 the US Equity Market recorded monthly declines of more than 5% 27 timesversus just 6 in the case of the US High Yield Market.
Since 1995 the European Equity Market recorded monthly declines of more than 5% 33times versus just 9 in the case of the European High Yield Market.
European High Yield - 2012 - Monthly Returns
-25.00%-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
European Equities - Monthly Returns
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1995 - 2012
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
5/8
Private and conditional. Unauthorised distribution strictly prohibited. 2012 Symfonie Capital LTD 5
High Yield Bonds Have Built-In Recovery Potential
Bonds are issued at face value (par). In down markets, they may tradebelow par. As their maturity nears bonds trend back toward par and asmarkets recover bonds trend back toward par. High Yield bonds mayexperience deeper declines, but High Yield Bonds compensate with higherlong term returns. Bonds reward patient investors.
Source: Credit Suisse, Symfonie Capital
Bond Prices as % of Par
50%
60%
70%
80%
90%
100%110%
120%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2000 - 2012
A Rated Bonds High Yield Bonds
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
6/8
Private and conditional. Unauthorised distribution strictly prohibited. 2012 Symfonie Capital LTD 6
In Recessions Stock Markets Get Hit Harder than Bond
Markets
From August 2000 to February2003 the US Equity Marketdeclined by 44.5% and the
European Equity Marketdeclined by 58.3%. In contrast,the US High Yield Marketgenerated a 6.9% total returnwhile the European High Yield
Market was down 13%. Since 2008 High Yield has
consistently provided higherannual returns than equities.
High Yield Bonds have a built
in-advantage because theyearn interest. Over the mediumterm interest payments helpprovide a more stable return. Incontrast, equity markets areprone to sharp and long lastingdown cycles.Source: Credit Suisse, Bloomberg, Symfonie Capital, S&P 500. DowJ ones Stoxx50
Rolling 12 Month Returns - High Yield vs. Equities
-60%
-40%
-20%
0%
20%
40%
60%
80%
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Return
High Yield Equities
Rolling 12 Month Returns - Euro
High Yield vs. Equities
-50%
-30%
-10%
10%
30%
50%
70%
90%
1996
1998
2000
2002
2004
2006
2008
2010
2012
Return
High Yield Equities
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
7/8
Private and conditional. Unauthorised distribution strictly prohibited. 2012 Symfonie Capital LTD 7
In Recessions Stock Markets Get Hit Harder than Bond
Markets
Despite the global economicdownturn since 2008 and theEuropean sovereign debt crisis
High Yield bonds have providedstrong returns.
Equities have yet to recoverfrom the peak prior to thecollapse of Lehman. High Yield
bonds, in contrast, not onlyrecovered, but have alsocontinued to generate superiorreturns.
High Yield bonds have two
advantages over equities. First,performing High Yield bondspay interest in good times andbad times. Second, they havea stated value with a statedmaturity date.
Source: Credit Suisse, Bloomberg, Symfonie Capital, S&P 500. DowJ ones Stoxx50
European High Yield vs . Equities
0
100
200
300
400
500
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1995 - 2012
Inde
x1995=
100
High Yield Bonds Equities
US High Yield vs. Equities
0
200
400600
800
1000
1200
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
1986 - 2012
Index
1986=
100
High Yield Bonds Equities
-
7/29/2019 A Few Things About High Yield You Never Knew (but were afraid to ask)
8/8