The Credit Cycle: Whats Next for Credit Portfolio Management and the Markets

1
The Credit Cycle Whats Next for Credit
Portfolio Management and the Markets
Fall Meeting November 15, 2006

• Martin Fridson, CFA
• CEO, FridsonVision LLC
• 212-937-0975 martin_at_fridsonvision.com
• www.FridsonVision.com

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The Year So Far
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Yields and Spreads
2006, Monthly, Through September 30
Source Bloomberg.
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Where We Are in the High Yield Cycle
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Default Rate
Moodys Speculative Grade Default Rate,
Trailing-Twelve-Months U.S. Percentage of
Issuers, Q1 1997 Q3 2006, Quarterly
Source Moodys Investors Service.
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Default Rate and Risk Premium
Default Rate versus High Yield
Spread-versus-Treasuries Q3 1986 Q3 2006,
Quarterly
Moodys Speculative Grade Default Rate,
Trailing-Twelve-Months, U.S. of Issuers.
U.S. High Yield Master II Index (H0A0) YTM minus
U.S. Treasury, Current 10-Yr (GA10) YTM. Sources
Merrill Lynch Co., Moodys Investors Service.
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High Yield Index Total Return
1987-2005
Source Merrill Lynch Co.
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BB vs. B Total Return Differential
1989-2005
Source Merrill Lynch Co.
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New Issuance Quality
Percentage of New Issuance Rated BB- and Higher
by Senior-Equivalent Rating By Number of Issues,
1997-2005
Through September 30 Sources Advantage Data,
Bloomberg.
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Hard versus Soft Landing
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Default Rate by Rating Category
1990 versus 2000
Source Moodys Investors Service.
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Default Rate by Rating Category
1991 versus 2001
Source Moodys Investors Service.
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Ratings Mix of Speculative Grade Universe
By Senior-Equivalent Rating, Percentage-of-Issuers
Basis
Source Moodys Investors Service.
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Default Rate Impact Hard versus Soft Landing
1 Cohort formed January 1, 2005. Source Moodys
Investors Service.