PGIM's Collins Sees 100Bps Wider High-Yield Spreads

The video discusses the impact of credit contraction on default rates in the high yield market, noting that lending standards are tightening, which may lead to higher default rates. The historical average default rate is around 4%, and the current market is considered to be at fair value. The discussion also covers how recessions typically widen credit spreads, suggesting a tactical approach to investment. The video concludes by highlighting the importance of timing in the economic cycle to find cheaper entry points for investment.

What is one of the leading indicators of default rates in the high yield market?

• Stock market trends

• Lending standards

• Interest rates

• Inflation rates

What is the historical average default rate in the high yield market?

• 2%

• 3%

• 4%

• 5%

How do credit spreads typically behave when default rates increase?

• They remain stable

• They narrow

• They disappear

• They widen

What is the expected change in credit spreads before considering high yield investments?

• 200 basis points wider

• 100 basis points wider

• 50 basis points wider

• 150 basis points wider

What economic condition is associated with wider credit spreads and cheaper entry points?

• Monetary easing

• Economic expansion

• Stable interest rates

• Credit deterioration