NEW YORK, June 26, 2013 /PRNewswire/ -- In a new report produced for S&P Capital IQ's LCD group, Wall Street leveraged finance specialist, Marty Fridson, delves into a question on many investors' minds about the likely impact on major asset classes of a sharp rise in Treasury bond yields -- a question significantly amplified by recent Federal Reserve statements of possible tapering in purchases of long-term debt obligations.
From an analysis of the historical relationships between the yield curve and valuations on four major asset classes, Fridson estimates that if the 10-year Treasury yield rises to 4% while short-term interest rates remain unchanged, the option-adjusted spreads on high-yield bonds and investment grade corporates will widen to levels last seen in September 2009. The impact on stocks could actually be moderately positive with the P/E multiple potentially rising from 15.62 to 17.36. The level reached by the S&P 500 would also depend on the earnings to which that multiple would be applied.
"The leveraged loan market's floating-rate nature will represent a comparative advantage as its three-year yield rises by 295 basis points under our assumptions," says Fridson, CEO, FridsonVision LLC and consultant to S&P Capital IQ's LCD group. "All of these outcomes will depend on other factors, such as economic conditions and the expected level of corporate earnings, but investors should not underestimate the significance of an extremely unusual yield curve."
To schedule an interview with Marty Fridson or to obtain a copy of his report, call or email media contact below.About S&P Capital IQ S&P Capital IQ, a part of McGraw Hill Financial (NYSE:MHFI), is a leading provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. S&P Capital IQ provides a broad suite of capabilities designed to help track performance, generate alpha, and identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as the S&P Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Capital IQ Valuations; and research offerings, including Leveraged Commentary & Data, Global Markets Intelligence, and company and funds research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need. For more information visit: www.spcapitaliq.com. S&P Capital IQ, as well as its affiliates, directors, officers shareholders, employees or agents (S&P Capital IQ) are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for any results obtained from the use of the Content described herein, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P Capital IQ and its affiliates DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
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