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PRObondsmonitor. High Yield Bonds (HVO). Who took the risk

PRObondsmonitor.  High Yield Bonds (HVO).  Whoever took the risk won.  Is it worth the risk further?

Those who took the risk were lucky. The high-yield segment of bonds not only retains the highest coupon payments, but also noticeably increased in price. For the given sample (issues of over 200 million rubles with the highest liquidity), the average body gain over the past 2 weeks is 0.9%. The increase in the previous 2 weeks was more modest, 0.4%, but it was also there.

There are fewer investment options with high potential income, which naturally expands the HPO buyer base, involving both a more conservative and less dedicated and discerning audience.

Our HDO portfolio – PRObonds # 1 – has already exceeded 14% per annum. Note that we are operating in the lower range of coupons. When investing in a wide range of high-yield securities, it was possible to earn 3-5% per annum more

It says only one thing – high speculative premium in the segment of high yield bonds

But the securities market is cyclical. A speculative premium is bound to turn into a speculative discount… Now I estimate this premium at 2-4% per annum. The discount will be similar. And in the perspective of 2021, the discount is quite capable of being realized. Not as a local correction, even a deep one, but as a long-term pressure factor. In this case, the profitability of the HDI segment may well slide to 8-10%. If the fate of defaults and dramatic drops in the quotations of individual bonds, of which there will be more this year than in the past, then a broad portfolio of VOIs may compete in terms of profitability not with the stock market, as it is now, but with the government bonds market. And the outcome of the competition is not obvious.

Why am I writing all this? To the one, that in risky instrument classes, which include the high-yield bond segment, blind diversification will not save your investment

Selective strategy is productive in such games. At least I suggest avoid companies generating losses, new companies, companies with no or almost no banks in their loan portfolios (Funding base – bonds and / or loans).

And if you are not able to appreciate it, just don’t bring money here.

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