Credit Spreads to Widen in 2023: Oaktree's Panossian

The video discusses the current economic downturn and its impact on credit spreads, highlighting the volatility expected in 2023 due to factors like commodity and labor cost inflation. Despite these challenges, there are opportunities in the credit market, particularly in high-quality, high-yield bonds and private credit markets. The speaker emphasizes the importance of careful selection in this credit pickers market, noting the attractive returns available for companies unlikely to default. The discussion also covers the dislocation in private credit markets and the changes in direct lending dynamics.

What are some factors contributing to the expected widening of credit spreads?

• Reduction in interest rates

• Increase in government spending

• Decrease in consumer demand

• Commodity and labor cost inflation

What makes the current market a 'credit pickers market'?

• Government intervention

• High default rates

• Availability of bargains and attractive yields

• Low interest rates

What is notable about the current percentage of double B rated high yield bonds?

• It is the lowest in 10 years

• It is the highest in 10 years

• It has remained constant over the years

• It is decreasing rapidly

What is causing dislocation in certain private credit markets?

• Increase in government regulations

• High inflation rates

• Decrease in consumer spending

• Banks stepping away from large cap direct lending

What changes are being observed in direct lending markets?

• Reduction in available credit

• Increase in government subsidies

• Widening in pricing and tightening in legal protections

• Decrease in interest rates