Thought Capital
Leveraged Credit 2024 Review and 2025 Outlook
Key Highlights
- Moderating inflation, resilient economic growth, and easing monetary policy provided a supportive backdrop for high yield bond and leveraged loan performance in 2024. Spreads remain tight, hovering just above all-time lows set in June 2007.
- Primary market activity for high yield bonds has already topped the last two years combined. Leveraging transactions, such as dividend deals, buyouts, and other M&A activity increased, a trend that we think will continue in 2025.
- Although default rates have been at or below long-term averages, so have recovery rates. These lower recovery rates are indicative of a trend of looser covenants coupled with challenging capital market conditions for overleveraged issuers.
- We believe that we are reaching the top of the cycle for the broader high yield and leveraged loan markets. Consequently, we are being more cautious in our investment approach and are willing to sacrifice yield for safety.
Important Disclosures
This information is provided for illustrative purposes only. Opinions and views expressed constitute the judgment of Polen Capital as of December 2024 and may involve a number of assumptions and estimates which are not guaranteed, and are subject to change without notice or update.
Although the information and any opinions or views given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. The views and strategies described may not be suitable for all clients.
This document does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. Past performance does not guarantee future results and profitable results cannot be guaranteed.
20241203-4068872