HALISTER1: High Yield 2017 Issuance Est. $200b, Total Returns 4-5%: BofAML

High Yield 2017 Issuance Est. $200b, Total Returns 4-5%: BofAML

(Bloomberg) -- U.S. high-yield issuance seen falling by 5%-8% to $200b in 2017 based on a combination of lending standards which are not expected to tighten significantly, changes in borrowing costs and trailing 3-Mo.migration rates, BofAML strategists led by Michael Contopoulos write in client note.
  • Issuance volume forecast also considered the potential for a tax cut which could increase the after-tax cost of debt
  • Total returns for 2017 est. at 4%-5% based on USD appreciation, higher rates, increased volatility, uncertainty around commodity prices and political risk
  • 2017 is expected to see an end to the global QE trade and the perpetual central bank put
  • Default rate is projected at 2%-2.5%, as fewer energy companies default
  • Recommend overweight Energy, Gaming, and Telco; underweight Autos, Healthcare, Real Estate, Hotels & Leisure, Technology and Utilities
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Michael Contopoulos (Bank of America Corp)

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