- Investment grade markets benefited directly from the fiscal programmes designed to keep the credit channel open, such as furlough schemes, direct lending schemes, banking sector forbearance and expanded purchases of corporate bonds.
- While there might be some default or downgrade risks as these schemes wind down, the makeup of the market means it shouldn’t be a major concern, and indeed the outlook for some sectors is as good – if not better – than before the pandemic.
- Even for negatively affected sectors, many IG-rated companies have significant levers they can pull in order to react, including cost-cutting, capex phasing, working capital management and inorganic activity such as asset sales, dividend cuts or equity raises.
- The combination of policy factors and the fact this asset class can deleverage – and management teams will try to deleverage – makes us quite positive for the future. More positive than we were coming into the year.
“We shouldn’t underestimate the fact the pandemic may have changed behaviour significantly. Will we return to five days in the office or is home working here to stay?”