The Credit Edge by Bloomberg Intelligence Bloomberg

Commercial mortgage-backed securities are the best credit opportunity for the next 12 months, according to Oded Manor, global head of fixed income manager research at BlackRock. “CMBS is super-interesting because everyone hates it — or many people hate it,” says Manor in the latest Credit Edge podcast from Bloomberg Intelligence. “That market is already pricing a lot of the negative news, unlike many other parts,” Manor tells Bloomberg News’ James Crombie and BI Senior Credit Analyst Jody Lurie. Also in this episode, Manor and Lurie discuss liquidity risk, as well as relative value between bonds and loans. In addition, Manor talks about headwinds in European credit markets from the upcoming French election.
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Up to a quarter of Europe’s high-yield borrowers can’t afford to pay the current high interest rates to refinance debt that’s coming due, according to alternative asset manager Arini. “The market has been very active in refinancing these companies but we still have a lot to do,” says Hamza Lemssouguer, founder and chief investment officer of Arini, in the latest Credit Edge podcast from Bloomberg Intelligence. For as much as 25% of the market, “it’s just impossible to afford the current interest rates,” Lemssouguer tells Bloomberg News’ James Crombie and Giulia Morpurgo, and Bloomberg Intelligence Senior Credit Analyst Tolu Alamutu. Also in this episode, Lemssouguer and Alamutu discuss challenges in the commercial and residential real estate sector. And Lemssouguer talks about how to invest in debt collectors. 
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Private credit’s double-digit returns are here to stay, even as interest rates drop and risks rise, according to Arcmont Asset Management. “Our spreads have been very consistent for a decade,” says Mattis Poetter, the European private debt firm’s co-chief investment officer, in the latest Credit Edge podcast from Bloomberg Intelligence. “I think that’s sustainable,” he tells Bloomberg News’ James Crombie and Kat Hidalgo, and Bloomberg Intelligence Senior Credit Analyst Robert Schiffman. In addition, Arcmont’s co-CIO discusses private debt defaults, pay-in-kind structures, debt-for-equity swaps and opportunities in net-asset-value financing. Also in this episode, Poetter and Schiffman weigh market dislocations and opportunities for rescue financing. 
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The best credit investments are in asset-backed securities, particularly those linked to US households, according to JPMorgan Asset Management. “We absolutely see opportunities for yield pickup there,” says Kay Herr, the firm’s chief investment officer for US fixed income, in the latest Credit Edge podcast from Bloomberg Intelligence. “The consumer’s going to be OK,” she tells Bloomberg News’ James Crombie and Bloomberg Intelligence Senior Credit Analyst Julie Hung. The CIO meanwhile flags potential risks building in private credit that could ripple through high-yield debt markets. Also in this episode, Herr and Hung discuss retail trends as high- and low-income consumers diverge. 
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US companies with about $200 billion in debt — 10% of the junk market — can’t survive at prevailing elevated interest rates, according to Bank of America. “At the bottom decile, we are looking at issuers that are in most likelihood not going to be able to come out of this high-rate episode without doing something to their balance sheet,” says Oleg Melentyev, head of US high-yield strategy at Bank of America, in the latest Credit Edge podcast from Bloomberg Intelligence. “Half of that segment is free-cash-flow negative unless the Fed cuts interest rates soon and deep — which is a pretty weak assumption,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence Credit Analyst Matthew Geudtner. Also in this episode, Melentyev and Geudtner discuss the outlook for companies in the commodity and capital goods sectors. 
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Invesco is buying real estate investment trust debt and preferred bonds from banks, betting that the US economy stays strong and interest rates eventually fall. “If you’re looking at yield, it is kind of a golden age for bonds,” says Matt Brill, the $1.6 trillion money manager’s head of North America investment-grade credit, in the latest Credit Edge podcast from Bloomberg Intelligence. “You’re getting paid to wait and at some point here, you’re going to get that kicker of the Fed starting to cut,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence Senior Credit Analyst Tolu Alamutu. Also in this episode, Brill and Alamutu discuss commercial real estate risks and opportunities as rates stay high. 
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