According to Bloomberg News, high yield debt in the United States is well placed to tide over volatility caused by the ongoing Russian invasion of Ukraine, as per UBS. On a note, strategists at UBS, Matthew Mish, say that the signs of distress are limited.
The US junk debt outperformed
The biggest risk is that global investors exposed to Russia/Ukraine might have to sell US credit so that adequate liquidity can be raised amidst the outflows, according to UBS.
Bloomberg News reports that US junk debt outperformed compared to Europe, Asia, and emerging markets, while the systemic risks are appearing to be contained, stated UBS in a note released late Wednesday. While interest coverage is at an all-time high, they have added that leverage is seen in the bottom quartile.
Outflows of HY have come to a halt, rising stars are bringing down the net debt, and dealer positions are above average, as the strategist wrote.
UBS recommends that investors invest in B-rated bonds and debt in the communication and financial sectors. They have advised being underweight consumers of non-cyclical and cyclical bonds.
Bloomberg News reports that UBS has said that the overall direct exposure to Ukraine and Russia is almost negligible in terms of revenue for the issuers of US high yield bonds and that of the leveraged loans, as said by UBS.
The strategists have also said that high-yield debt in Asia and Europe will offer better returns for investors who exercise patience by the end of the year.
