Thematic Credit Investing

Apollo Chief Economist

Our monthly credit market outlook is available here, and the three key themes for investors are 1) Up in quality, 2) Large cap, and 3) Low leverage and high interest coverage ratios.

With the Fed on hold well into 2024 and the maturity wall coming, debt refinancings will continue to come in at higher levels of yields, see the first chart below.

The bottom line is that the cost of capital has increased significantly, and Fed hikes are biting harder and harder, particularly for companies with weak credit fundamentals.

Comparing coupons and effective yields for IG and HY bonds maturing in 2024
Source: Bloomberg, Apollo Chief Economist
A default cycle has started
Source: Moody’s Analytics, Apollo Chief Economist
Thematic credit investing
Source: Apollo Chief Economist
Credit market outlook

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