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->Who Will Suffer from a Leveraged Credit Shakeout?
By Charlie Henneman, CFA
Categories: Fixed Income, Investment Topics

Of all the noteworthy moments from the 2014 CFA Institute Fixed-Income Management Conference, the bombshell may have been the default call from Martin S. Fridson, CFA.

Fridson, CIO at Lehmann Livian Fridson Advisors, has been a leading figure in the high-yield bond market since it was known as the “junk bond” market — and he sees as much as $1.6 trillion in high-yield defaults coming in a surge he expects to begin soon.

“And this is not based on an apocalyptic forecast,” he assured the audience.

High-yield bonds, typically issued with credit ratings at the bottom of the scale, tend to suffer default surges during troughs in the credit cycle. The first high-yield default surge occurred from 1989 to 1992, and encompassed the collapse of Drexel Burnham Lambert. The second surge ran from 1999 to 2003, following the bursting of the dot-com bubble, and the third happened in the midst of the global financial crisis, from 2008 to 2009.

more http://blogs.cfainstitute.org/investor/2014/10/30/who-will-suffer-from-a-leveraged-credit-shakeout/