INVESTMENT ADVISORS, INC. High Yield Review Data as of 11/3/218 Investment Advisors, Inc. 24 Elm Street Montpelier, Vermont 82.229.544 kdp@kdpyield.com
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
Default Risk Changes Historical By Year Upgrades Downgrades 16 14 138 133 Number of Companies 12 1 8 6 4 2 15 14 17 13 76 67 66 64 49 35 33 23 65 18 18 19 11 115 98 1 98 89 85 86 81 75 72 67 697 72 6 61 63 57 54 6 659 55 53 55 48 48 48 43 45 39 35 38 37 29 28 2927 28 199 1992 218 Source: 3
Moody s Historical High Yield Default Rate 1971 November 218 14.% 12.% 1.% 8.% 6.% 4.% 2.% Moody s estimates that the rate will fall to 2.6% by year-end 219..% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 Note: Defaults based on global (developed and emerging market) Moody s- rated universe. Source: Moody s Investor Service, BofA Merrill Lynch Global Research 4
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, 8 6 4 2 25 2 15 1 5 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 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
High Yield Daily Price Index 8/17/9 11/3/18 11 15 1 95 9 85 8 75 7 65 6 55 5 45 199 1991 1992 218 Source: Scaled to equal 1 at 12/31/92 6
Universe High Yield Bond Price 11 15 96.61 at 11/3/18 1 95 Average Price 9 85 8 75 7 65 6 1989 199 1991 1992 218 Source: 7
High Yield Daily Yield Index 8/17/9 11/3/18 2 Percent (%) 18 16 14 12 1 8 6 4 199 1991 1992 218 Source: 8
Yield Spreads To 1-Year Treasury Universe Avg. bp spread HY Index Avg. bp spread Basis Points (bp) 15 145 14 135 13 125 12 115 11 15 1 95 9 85 8 75 7 65 6 55 5 45 4 35 3 25 2 High Yield Index Universe 218 1992-372 1992-4 - 343-344 - 299-33 - 318-368 - 299-338 - 27-299 - 388-44 - 416-432 - 544-53 - 642-64 - 641-658 - 459-486 - 295-286 - 344-36 - 325-291 - 348-325 - 836-796 - 774-729 - 511-488 - 459-443 - 465-463 - 39-339 - 279-284 - 48-391 - 445-42 - 295-279 218-33 218-299 Source:, Bloomberg 9
Universe Spreads By Quality Sector 45 4 35 Basis Points (bp) 3 25 15 1 886 5 497 29 225 1989 199 1991 1992 218 High Quality Above Average Average Below Average Source: 1
Universe Yields By Quality Sector 45 4 35 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 (%) 25 2 15 1 5 1989 199 1991 1992 218 Cash Pay Bonds Source: High Quality Above Average Average Below Average 11
HY Daily Index Yield and 1-Year Treasury Yield 18 Index Yield 16 14 12 1 8 6.57% - 11/3/18 6 4 218 Source: 16 1-Year Treasury Yield 14 12 1 8 6 4 2.99% - 11/3/18 2 198 1982 1984 1986 1988 199 1992 218 Source: Bloomberg 12
Index Spread to 5-Year Treasury 16 14 12 Basis Points (bp) 1 8 6 376bp 11/3/18 4 2 218 Source:, Bloomberg 13
Index Spread to 5 & 1-Year Treasuries 16 14 12 Basis Points (bp) 1 8 6 4 2 376bp at 11/3/18 358bp at 11/3/18 218 to 1-YR to 5-YR Source: 14
High Yield Daily Index - Total Return (YTD) 8/17/9 11/3/18 5 44.44% 46.74% 4 3 2 1 19.38% 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% -1-2 -3-24.6% 199 1992 218 Source: 15
Comparative Returns YTD November 218 6.% 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
AMG HY Mutual Funds ($ billions) New Issue Volume and HY Fund Flows 35 3 3 2 New Issue Volume ($ billions) 25 2 15 1 1-1 -2 5-3 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 218-4 17
Quality Distribution By Principal Amount Public New Issues Year Number Of Issues Volume ($ Billions) BBB BB B CCC/ CC/C Not Rated 218 66 46. 35.1% 47.% 17.9%.%.% 1 62.9 39.% 45.4% 13.2%.4% 2.1% 84 55.4 4.% 42.3% 4.7%.% 13.% 83 53.2 17.8% 56.5% 22.3% 1.4% 2.% 123 78.9 14.3% 57.1% 24.8% 1.1% 2.7% 112 65.5 1.9% 67.1% 14.6% 1.2% 6.2% 144 93.3 9.7% 53.1% 29.4%.2% 7.6% 85 52.1 14.8% 59.4% 22.5%.6% 2.7% 111 54.9 16.1% 43.7% 33.2% 2.% 1.7% 81 36. 2.3% 37.6% 31.8% 1.5%.8% 17 6.8 3.9% 65.8% 3.3%.%.% 54 28.8 1.5% 44.5% 4.9% 4.1%.% 55 28.4 4.9% 5.2% 42.8% 2.1%.% 27 7.7 7.8% 69.8% 2.5% 1.9%.% 52 14.7 13.3% 4.2% 35.8%.7%.% 61 18.4 17.8% 42.1% 39.4%.7%.% 38 9.5 22.7% 47.4% 23.8% 3.9% 2.1% 49 17.6 5.5% 74.9% 19.6%.%.% 2 7.7 3.2% 7.3% 22.1% 4.4%.% 61 16.8 3.3% 58.3% 34.6% 1.8% 2.1% 93 24.9 2.2% 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
Quality Distribution By Principal Amount 144A New Issues Year Number Of Issues Volume ($ Billions) BBB* BB B CCC/ CC/C Not Rated 218 237 138.9.8% 37.6% 44.4% 12.3% 4.9% 417 225.7 5.8% 4.4% 39.7% 12.7% 1.3% 267 163.4 4.% 4.7% 45.2% 7.1% 3.% 296 22.2 1.2% 36.9% 48.6% 9.3% 5.% 412 26.2 3.9% 33.% 42.3% 14.6% 6.2% 485 233.1 1.9% 38.6% 34.% 17.1% 8.2% 485 226.3 2.5% 24.3% 52.4% 14.9% 5.9% 342 156.2.6% 28.9% 48.3% 14.8% 8.4% 453 21.1 6.2% 24.7% 53.5% 1.3% 5.3% 275 116.4 3.7% 4.6% 47.7% 5.2% 2.8% 94 5.5.8% 2.6% 48.9% 17.1% 12.6% 239 16.8 1.2% 17.3% 46.4% 33.7% 1.4% 247 12.3.% 29.% 53.4% 16.4% 1.2% 299 82.6 2.5% 25.5% 59.8% 11.6%.6% 468 122. 5.1% 24.1% 55.3% 13.3% 2.2% 43 19.7 3.8% 2.9% 65.2% 7.2% 2.9% 27 54. 7.9% 27.4% 63.2%.9%.6% 237 66.8 6.9% 37.8% 51.3% 2.1% 1.9% 93 29.4 1.% 17.5% 64.1% 8.% 9.5% 269 68.6.1% 22.1% 71.8% 2.2% 3.8% 488 96.7 1.6% 19.5% 6.1% 6.2% 12.6% 463 8. 2.1% 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
High Yield Market Data Percentage of High Yield New Issuance Rated B- or Lower* 1985 November 218 8 7 6 Percentage (%) 5 4 3 2 1 1985 1986 1987 1988 1989 199 1991 1992 218 * Public and 144a Offerings, by Principal Amount Source: BofA Merrill Lynch Global Research 2
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