HALISTER1: HIGH YIELD: Growing Cautious, Against Deploying New Cash: UBS

HIGH YIELD: Growing Cautious, Against Deploying New Cash: UBS

(Bloomberg) -- While retaining a neutral view on U.S. high yield, UBS is increasingly cautious and is against deploying new cash, strategists led by Stephen Caprio write in note.
  • It is not often that an exogenous shock comes so late in the credit cycle with central banks already at the zero bound
  • High-yield funding market could shut down in the near-term; risks are skewed to the downside
  • Elevated recession risks for the U.S., a strong USD, lower oil prices and banking sector stress could cause contagion for the credit market
  • Recession odds are 34% vs 5%-20% in past Eurozone crises
  • Neutral view is based on an accommodative Fed, resilient U.S. growth because of low rates and limited financial market volatility
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
UBSG VX (UBS Group AG)

People
Stephen Caprio (UBS Asset Management Japan Ltd)

Topics
Leveraged Finance

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