2018 Sector Teams’ Outlook: Bank Loans

Looking ahead, we expect similar bank loans returns in 2018 as we experienced in 2017, as corporate fundamentals show limited deterioration and defaults are likely to remain below historical averages due to low forecasted maturities. We expect to see future coupon increases on loans as the US Federal Reserve raises rates, and for the market to anticipate such increases. Collateralized loan obligation issuance forecasts for the year are very robust. We believe retail investors will be marginal buyers of bank loans as interest rates increase. There is always a chance that markets in general may turn to risk-off sentiment, temporarily, due to a variety of factors, including the risk of war and trade issues.

 

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