Credit Markets ‘On the Cusp’ of Dramatic Repricing: Bramshill

Bramshill News

By Robert Lee

November 6, 2017 (Bloomberg) – Fixed income markets are “on the cusp” of change that could result in dramatic repricing, Bramshill Investments wrote in a 3Q investor letter obtained by Bloomberg.

* Opportunity in credit if 10-yr IG corporates yield 5.0-5.5%, HY index moves toward 7.5% yield, long-duration high-quality muni bonds approach 5%

** “We have witnessed markets change dramatically in short periods. We feel the fixed income markets are on the cusp of such a change”

** “Higher yields and spreads will be the result of a strong economic environment, not an upcoming recession or risk-off event which would cause spreads to widen”

* There is a “poor risk-reward set up in today’s low yield and lofty price environment for most fixed income asset classes”

** Probability of loss “much higher than what is currently reflected” in markets

* “Cannot imagine corporate bonds, municipal bonds, high yield corporates, or long duration preferreds having a meaningful positive total return”

** Bloomberg Barclays HY index absolute return of ~5.7%, “not acceptable compensation for an index which includes CCC-rated credit risk securities”

* Fixed-to-floating preferred securities are “most attractively priced asset class in our investable universe” due to limited durations

** “Until perpetual (long duration) preferred structures offer yields approaching 7% (which is about 125bps higher than current levels), we will not be attracted to such securities”

* Largest allocation is fixed-to-float preferreds in financials

** Credit quality of names like Citi, JPMorgan, Morgan Stanley, Amex “highest level in the past seven years”

** “Economic environment should continue to benefit the financial sector as business activity expands and interest rates rise”

* Bramshill has cyclical exposure to oil and gas credits like Hess, Western Gas Partners, WPX Energy, Kinder Morgan, Southwestern Energy

** “These credits and securities are less interest-rate sensitive and will most likely benefit significantly from higher growth and higher inflation.”

** “Energy sector has been making asset sales, termed out their balance sheets, has liquidity, and is benefiting from a rebound in underlying commodity prices”


–With assistance from Arie Shapira.

To contact the reporter on this story:
Robert Lee in New York at
To contact the editor responsible for this story: James Crombie at

Bramshill Investments, LLC is an asset management firm and federally registered investment adviser that maintains a principal office in the State of New Jersey. The information contained in this message is confidential, protected from disclosure and may be legally privileged. If the reader of this message is not the intended recipient or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any disclosure, distribution, copying, or any action taken or action omitted in reliance on it, is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by replying to this message and destroy the material in its entirety, whether in electronic or hard copy format. This email may contain information that is not suitable for all investors and no statement is to be construed as a solicitation or offer to buy or sell a security.