Schwab Sees Rates Weighing on Loan Issuers 'Right Now'

The video discusses the impact of high interest rates on corporate leverage profiles and market perceptions. It highlights concerns about the loan market, where issuers face increased interest expenses. The discussion also covers the rising default rates and the outlook for high yield bonds, emphasizing caution while noting that spreads remain relatively stable. The video advises clients to hold long-term positions to ride out potential price declines.

What has been the market's reaction to the risk associated with corporate leverage profiles amidst higher interest rates?

• Spreads have remained stable.

• Spreads have increased only in the junk market.

• Spreads have widened significantly.

• Spreads have come down across the rating spectrum.

What is the primary reason for the underperformance of loans in recent years?

• Decreased demand for loans.

• Increased interest expenses for loan issuers.

• Stricter lending regulations.

• Improved performance of high-yield bonds.

What paradox is observed in the bond market despite challenges in the loan market?

• Bonds have underperformed like loans.

• Bonds have continued to rally.

• Bonds have experienced increased defaults.

• Bonds have shown no significant change.

What trend is observed in default rates according to Moody's and S&P data?

• Default rates have remained stable.

• Default rates have tripled compared to a year ago.

• Default rates have decreased significantly.

• Default rates have doubled compared to a year ago.

What is the suggested strategy for investors in high-yield bonds given the current market conditions?

• Sell all holdings immediately.

• Hold investments for a long period to ride out price declines.

• Invest more aggressively in high-yield bonds.

• Avoid high-yield bonds entirely.