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Quarter-End Insights

Credit Outlook: Shareholder Activity Adds to Credit Risk for Bondholders

A change in focus toward shareholder-friendly activity in 2011 will cause issuer-specific credit widening to the detriment of some bondholders.

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  • We forecast credit spreads will tighten...
     
  • ...But shareholder-friendly activities are increasing, and we expect more strategic acquisitions and LBOs. Covenant analysis will be important for bond investors.
     
  • Continued negative headlines from European sovereign issuers will cause short-term volatility.
     
  • As we expected, interest rates have bounced off their lows, and we recommend that investors begin to leg into longer durations.