MANAMA: Investcorp is bullish on global credit market performance in the second half of the year, in light of continued global economic recovery, favourable credit fundamentals and strong loan demand.
In its latest quarterly ‘House View’ on the state of global credit markets, the Bahrain-based alternative investment manager reviews the key trends driving performance and market dynamics in US and European credit and provides the firm’s expectations through 2021.
“Amid strong global growth in recent months and a supportive economic backdrop, we continue to remain optimistic about the future of global credit market performance through the end of the year,” said Jeremy Ghose, global head of Investcorp Credit Management.
“While the Covid-19 Delta variant has emerged as a potential deterrent to growth expectations, credit fundamentals are nonetheless solid and improving and CLO issuance has reached record levels to meet high demand for floating rate loan assets. We expect the favourable trends we saw in H1 to stay through year-end.”
Investcorp expects US leveraged credit, and loans in particular, to continue to perform well against a backdrop of strong US economic growth into 2022 and central bank policy likely to begin raising rates in the first half of 2023, if not sooner.
The firm is more cautious on sectors and individual credits with ‘reversion risk”’ and has reduced exposure in areas with a potentially unsustainable Covid-led demand bump.
Looking back on H1-2021, the most striking evidence of the recovery in European credit markets is the sheer volume of new issuance and its ability to absorb this level of issuance.
Total issuance across loans and high yield of Euro 151.5 billion in H1 2021 was Euro 11bn or 8 per cent above the previous record year in 2007.
European credit markets seem set for a positive second half driven by ultra-low default levels and increasing credit spreads as the supply-demand imbalance seen over H1-2021 corrects.
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