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George Goudelias shares his latest thoughts on the prospects for inflation and how certain asset classes may help protect portfolios in an inflationary environment.

Seix Senior Portfolio Manager Michael Kirkpatrick and his team focus on higher-quality credits that can minimize losses during selloffs, while also looking for mispriced securities to improve performance.

April 16, 2021

Market Review and Outlook 1Q21 - Leveraged Finance

As rates and inflationary expectations rose, investors in search of higher yields returned to the leveraged loan market in the first quarter. That allowed us to explore a number of new relative value opportunities. We also held on to the names we felt had the liquidity to ride through the pandemic lockdown, and we’re starting to see that benefit now.

In the high yield market, the three key dynamics were the COVID-19 vaccine rollout, the Treasury sell-off, and a record increase in supply. The ICE BofA US High Yield Index had a 0.81% return. The Index ended the quarter with a yield of 4.36%. The BB index ended with a yield of 2.58%. The single-B index ended at 3.92%, and CCCs tightened to 6.3%.

Steeper Curve, Record Liquidity, and Robust Growth Prospects

With rates rising every month of the first quarter and negative total returns across the board, one might assume that would lead to massive outflows in the investment grade taxable category. On the contrary, it was the exact opposite. An unquenchable thirst for yield led to consistent inflows.

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Inflation Perspectives with Seix’s Head of Leveraged Finance

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Market Review and Outlook 1Q21 - Leveraged Finance

Market Review and Outlook 1Q21 - Investment Grade and Tax-Exempt Fixed Income

Hedging Inflation with Bank Loans and High Yield Bonds

Look for High Yield Durability in 2021