High Yield in the Covid Crash: Risky, but potentially very rewarding
by James Tomlins
1. What’ s happened to the high yield market in the last month?
上個月高收益債市場發生了什麼？
We’ve seen negative returns of -12.7% for the global highyield market. Following a weak February this brought the Q1 return to -13.7%.To put this in context, this was the second worst month and second worstquarter since 1998. Only October 2008 and Q4 2008 saw a more negative drawdownfor the market.
2020年3月份全球高收益債市場的回報率為-12.7%，承繼了2月份以來的疲弱走勢，一季度總的回報率為-13.7%，創下自1998年以來單月以及單季度回報表現倒數第二的記錄，分別僅高於2008年10月以及2008年四季度的回報率。
下圖中，藍線為全球浮動利率高收益債的走勢，橙線為全球高收益債的走勢
2. Can it get worse?
情況會變得更糟？
Yes, but I think probably not that much worse. Over the long term, spreads have been wider (topping out at over 2,000 basis points following the Lehman Brothers bankruptcy – see the chart below), and they are currently hovering at just under 1,000 basis points. It is hard to pinpoint the bottom of this particular market cycle. It may have been a few days ago, it could be in a few months’ time, but what gives me some hope and comfort that it might not get much worse is that:
有這個可能，但我認為可能不會太糟糕。從長期來看，信用利差的水平曾經比現在還高，見下圖，雷曼公司倒閉後美國信用債與同期限美國國債之間的利差曾一度升至2,000個基本點以上，如今信用利差的水平與1,000個基本點還差一點距離。很難精確地找出本輪信用債熊市週期的底部到底在哪，可能幾天前就已經到了，也可能是幾個月後，但能讓人感到一絲欣慰的是美國信用債市場的前景可能沒那麼糟糕，理由如下：
The policy response we’ve seen has been swift and hard-hitting both in terms of supporting markets and in terms of direct fiscal support for companies and individuals. Remember, the last time spreads got to 2000+ was beforethe US passed the Troubled Asset Relief Program legislation.
迄今為止我們看到針對新冠疫情的政策回應是迅速且強有力的，在提振市場情緒以及向企業和個人提供直接的財政支持方面發揮了有效的作用。記住一點，上一次信用利差的水平升過2,000個基本點還是在美國通過不良資產救助法案之前。
This coronavirus crisis has a definitive cause and thus should have a definitive end: once infection rates subside considerably and life returns to a semblance of normality, the world will move on. Of course, there will be long-lasting economic impacts, but this will not be forever and, given the action by policymakers, I do not think we are looking at an existential crisis for the high yield markets.
這次新冠危機有明確的起因，因此也應該會有明確的結果：一旦感染傳播的勢頭大幅減弱，生活恢復常態，整個世界將再次出發。當然了，疫情對經濟還會有長期的影響，但不會永遠持續下去，考慮到政策制定者們已採取了行動，我不認為高收益債市場會面臨生存危機。
下圖顯示的是美國高收益債信用利差歷年的走勢
3. Will there be more defaults?
會有更多的違約案例嗎？
Definitely. Global default rates were in the low singledigits for high yield coming into this. There is no doubt that we will see more companies restructuring their debts and in some cases failing altogether and going into liquidation. I would make two points here:
一定會的。當前全球範圍內高收益債的違約率正處於比較低的個位數，可以肯定未來會看到有更多的企業重組債務，有時候甚至會出現集中倒閉並進入清算程序。需要指出兩點：
There will be a huge dispersion in defaults between sectors. There is little doubt we will see a very large and substantial uptick in energy defaults given the recent OPEC actions and the subsequent oil price crash. Indeed, a few days ago a high yield issuer, Whiting Petroleum, filed for Chapter 11 bankruptcy protection. The company’s bonds are trading at 5% of face value, implying a loss to bondholders of around 95%. There will be more, and indeed the market has already started to price this in (see chart below for the US High Yield Energy bonds – a loss of almost 50% from peak to trough). Other sectors that look particularly vulnerable are transportation, non-food retail, automotive, basic industries and consumer cyclicals.
各行業板塊之間的發行人違約率會有巨大差別。考慮到近期歐佩克組織成員國採取了增產行動以及隨之而來的油價崩盤，能源板塊發行人的違約率無疑會快速上行。就在幾天前，有一家美國高收益債的發行人——懷廷石油，援引破產法第11條申請破產保護。該公司發行的公司債在二級市場上的成交價只有面值的5%，意味著初始投資者的損失約為95%。還會有更多諸如此類的違約事件發生，市場報價確實已經開始消化了這種可能性（見下圖，美國能源行業高收益債的下幅最多時達到50%左右）。其他看起來非常容易出現違約的行業包括交通運輸、非食品零售、汽車、基礎原材料以及週期性消費品等。
On the other hand, food retailers, packaging businesses, Technology, Media and Telecom companies, pharmaceuticals and healthcare operators (which are all big parts of the High Yield market) will either see relatively limited impact to their businesses or in fact an upturn.
另一方面，食品零售、包裝、高科技、媒體及通訊、製藥和醫療保健這幾個高收益發行人比較集中的行業所受到的影響要麼比較小，要麼營收反而逆勢上揚。
Defaults do not always mean permanent destruction of capital. A business may default on its debt in the short term, but if bondholders receive equity as a result and the business is otherwise viable in the long term, then riding out a restructuring in this situation can often be the optimal strategy for recouping losses. This is the time when distressed debt expertise will really count.
違約並不一定意味發行人的資本構成會遭遇永久性地削弱。短期來看發行人可能會違約了其所發行的公司債，但如果投資人願意債轉股且發行人的經營狀況長期來看沒啥大問題，那麼在這種情況下進行經營重組通常是挽回損失的一個良策，當前正是不良債務方面的專家真正大顯身手的時機。
4. So defaults are going to rise but what’s priced in in terms of default rates?
公司債的違約率雖在上升，但市場定價隱含的是何種違約概率呢？
Quite a lot of the bad news is priced into spreads, and then some. If we look at the chart below, five year cumulative default rates ofa little over 50% are now priced into the market (assuming a 40% recovery). For investors focused on senior secured debt (e.g. senior loans and FRNS), theimplied default rate in spreads is even more pessimistic at just under 70% overfive years (assuming a 60% recovery). As we can see below, historically, the peak for five year default rates has been 31%. I would argue that the market is already pricing in a very extreme and painful scenario for defaults. Of course there will be losses for bondholders, but I struggle to see losses of this magnitude. Consequently, I think high yield valuations currently look cheap.
當前信用利差的報價已消化了相當多的壞消息，但這還遠遠不夠。通過下圖可以看到，當前的市場報價水平預示著未來5年的累計違約率略微高於50%，假設資金回收率為40%。對於清償順序為優先級的有擔保的公司債的投資者來說，信用利差的水平所預測的違約情況甚至更差，未來5年的累計違約率勉強低於70%，假設資金回收率為60%。如下圖所示，5年期的違約率的歷史最高值為31%。我想說的是，市場報價已經消化了違約率達到非常極端程度的可能性。違約當然會給債券投資者帶來損失，但我很難相信損失實際造成的損失會如此之大。因此，我認為當前高收益債的估值看起來很便宜。
5. What’s the potential upside for investors?
對投資者來講高收益債的價格有可能上漲嗎？
In the short term, no idea. The market is still very volatile and fairly illiquid. We could well see more short term losses rather than gains. However, in the medium to long term (e.g. a time horizon of say twoyears), the potential returns could be meaningful. Again, if history is any guide, the chart below shows the subsequent two year returns from the global high yield market following a quarterly drop of 4% or more. Over the past 20years, this has always generated a positive return, and indeed over the last six such dips the returns have been in excess of 20% over the following twoyears. This is not inconceivable either at this point in time. If for examplethe market has a spread of 1000 basis points, and in two years’ time this normalises to circa 400 basis points (a level consistent with more recent history), with four years of spread duration that would mean a potential capital gain of 24%. So all in all, certainly not without risk, volatility and defaults, but also potentially quite rewarding.
短期來看，尚未可知。高收益債市場仍處於動盪之中，流動性相當差。短期之內，行情下跌的可能性遠超上漲的可能性。但從中長期比如未來兩年來看，潛在的回報率可能比較可觀。與以往一樣，還是看看歷史上的情況吧，下圖顯示的是全球高收益債市場在經歷了單一季度幅度不低於4%的下跌之後2年的回報率。過去20年中，這種情況發生後高收益債投資總會帶來正回報，在經歷了過去6次幅度不低於4%的單季下跌之後的2年裡全球高收益債市場均取得了20%以上的回報，這個回報率眼下也是可以預期的。比如，假設當前為1000個基本點的美國高收益債的信用利差在兩年後降至400個基本點左右的常態化水平（400個基本點是近年來的平均水平），以信用債的久期為4年來計算，高收益債投資未來2年的總回報率將達到24%。總而言之，當前買高收益債不可能沒有一點風險，當然也會有市場波動以及違約的可能性，但潛在的回報也相當可觀。
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