KDP INVESTMENT ADVISORS, INC.

Transcription

1 INVESTMENT ADVISORS, INC. High Yield Review Data as of 11/3/218 Investment Advisors, Inc. 24 Elm Street Montpelier, Vermont

2 Default Risk Ranking Net Changes 2 15% 1 1% 5% DRR Net Change -1-2 % -5% -1% -15% -3-4 Moody's Default Rate 218-2% -25% -3% Default Risk Ranking Net Change Moody's Default Rate Source: 2

3 Default Risk Changes Historical By Year Upgrades Downgrades Number of Companies Source: 3

4 Moody s Historical High Yield Default Rate 1971 November % 12.% 1.% 8.% 6.% 4.% 2.% Moody s estimates that the rate will fall to 2.6% by year-end 219..% Note: Defaults based on global (developed and emerging market) Moody s- rated universe. Source: Moody s Investor Service, BofA Merrill Lynch Global Research 4

5 New Issue Volume ($ billions) High Yield Market Size and New Issue Volume 1,8 35 1,6 3 Market Size ($ billions) (a) 1,4 1,2 1, Market Size New Issue Volume (a) Mid-year market size excludes defaulted issues. Source: Edward I. Altman, NYU/Salomon Center estimates using Credit Suisse, S&P and Citi data; Investment Advisors, Inc. 5

6 High Yield Daily Price Index 8/17/9 11/3/ Source: Scaled to equal 1 at 12/31/92 6

7 Universe High Yield Bond Price at 11/3/ Average Price Source: 7

8 High Yield Daily Yield Index 8/17/9 11/3/18 2 Percent (%) Source: 8

9 Yield Spreads To 1-Year Treasury Universe Avg. bp spread HY Index Avg. bp spread Basis Points (bp) High Yield Index Universe Source:, Bloomberg 9

10 Universe Spreads By Quality Sector Basis Points (bp) High Quality Above Average Average Below Average Source: 1

11 Universe Yields By Quality Sector High Quality 1 + /1 + to 1/3 Above Average 1/4 to 2/4 Average Quality 2/5 to 3/5 Below Average 3/6 to 4/6 Speculative 5/6 to 7/7 Default Default Default Risk Ranking Quality Segments 3 Percent (%) Cash Pay Bonds Source: High Quality Above Average Average Below Average 11

12 HY Daily Index Yield and 1-Year Treasury Yield 18 Index Yield % - 11/3/ Source: 16 1-Year Treasury Yield % - 11/3/ Source: Bloomberg 12

13 Index Spread to 5-Year Treasury Basis Points (bp) bp 11/3/ Source:, Bloomberg 13

14 Index Spread to 5 & 1-Year Treasuries Basis Points (bp) bp at 11/3/18 358bp at 11/3/ to 1-YR to 5-YR Source: 14

15 High Yield Daily Index - Total Return (YTD) 8/17/9 11/3/ % 46.74% % 23.4% 17.92% 17.67% 13.5% 11.59% 11.18% 2.59% 3.45% 6.6% 1.53% -.6% -4.83% -3.49% 1.31% 2.98% 18.78% 12.92% 12.21% 4.93% 6.1% 2.1% 6.34%.75% -3.56% % Source: 15

16 Comparative Returns YTD November % 5.% 5.11% 4.% 3.% 2.% 1.%.75%.98%.% -1.% -2.% -.8% -1.8% -1.79% -3.% -4.% -3.7% -2.95% -5.% BofA ML HY Cash Pay BofA ML HY BB Daily High Yield Index BofA ML US Corp. Master Barclay's U.S. Aggregate 1-Year Treasury Russell S&P 5 Source: Investment Advisors, Inc.; BofA Merrill Lynch Global Research; Bloomberg 16

17 AMG HY Mutual Funds ($ billions) New Issue Volume and HY Fund Flows New Issue Volume ($ billions)

18 Quality Distribution By Principal Amount Public New Issues Year Number Of Issues Volume ($ Billions) BBB BB B CCC/ CC/C Not Rated % 47.% 17.9%.%.% % 45.4% 13.2%.4% 2.1% % 42.3% 4.7%.% 13.% % 56.5% 22.3% 1.4% 2.% % 57.1% 24.8% 1.1% 2.7% % 67.1% 14.6% 1.2% 6.2% % 53.1% 29.4%.2% 7.6% % 59.4% 22.5%.6% 2.7% % 43.7% 33.2% 2.% 1.7% % 37.6% 31.8% 1.5%.8% % 65.8% 3.3%.%.% % 44.5% 4.9% 4.1%.% % 5.2% 42.8% 2.1%.% % 69.8% 2.5% 1.9%.% % 4.2% 35.8%.7%.% % 42.1% 39.4%.7%.% % 47.4% 23.8% 3.9% 2.1% % 74.9% 19.6%.%.% % 7.3% 22.1% 4.4%.% % 58.3% 34.6% 1.8% 2.1% % 72.2% 18.8% 2.9% 3.8% * These issues are split-rated. Note: Rows may not sum to 1% due to rounding. Source: Investment Advisors, Bof A Merrill Lynch, Securities Data Co. 18

19 Quality Distribution By Principal Amount 144A New Issues Year Number Of Issues Volume ($ Billions) BBB* BB B CCC/ CC/C Not Rated % 37.6% 44.4% 12.3% 4.9% % 4.4% 39.7% 12.7% 1.3% % 4.7% 45.2% 7.1% 3.% % 36.9% 48.6% 9.3% 5.% % 33.% 42.3% 14.6% 6.2% % 38.6% 34.% 17.1% 8.2% % 24.3% 52.4% 14.9% 5.9% % 28.9% 48.3% 14.8% 8.4% % 24.7% 53.5% 1.3% 5.3% % 4.6% 47.7% 5.2% 2.8% % 2.6% 48.9% 17.1% 12.6% % 17.3% 46.4% 33.7% 1.4% % 29.% 53.4% 16.4% 1.2% % 25.5% 59.8% 11.6%.6% % 24.1% 55.3% 13.3% 2.2% % 2.9% 65.2% 7.2% 2.9% % 27.4% 63.2%.9%.6% % 37.8% 51.3% 2.1% 1.9% % 17.5% 64.1% 8.% 9.5% % 22.1% 71.8% 2.2% 3.8% % 19.5% 6.1% 6.2% 12.6% % 11.7% 76.% 2.9% 7.3% * These issues are split-rated. Note: Rows may not sum to 1% due to rounding. Source: Investment Advisors, BofA Merrill Lynch, Securities Data Co. 19

20 High Yield Market Data Percentage of High Yield New Issuance Rated B- or Lower* 1985 November Percentage (%) * Public and 144a Offerings, by Principal Amount Source: BofA Merrill Lynch Global Research 2

21 This is an analytical piece and the asset classes discussed herein, and any other materials provided to you, are intended only for discussion purposes and are not intended as an offer or solicitation of an offer with respect to the purchase or sale of any security and should not be relied upon by you in evaluating the merits of investing in any securities. These materials are not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to local law or regulation. Past performance is not indicative of future results. The asset classes discussed herein should not be perceived as investment recommendations. It should not be assumed that investments in any asset class discussed was or will prove profitable. The views expressed herein represent the opinions of Investment Advisors, Inc. and its affiliates and are not intended as a forecast or guarantee of future results. This material may not be reproduced or used in any form or medium without express written permission. Additional information on, including fee schedules can be found in Form ADV Part II which is available upon request. 21