In this episode of The Portfolio Fix, Marco Bravo describes why Fed policy and continued labor strength is behind the recent volatility in the Treasury market. Elizabeth Henderson explains the secular changes taking place to business models in the media sector, and how that affects content, advertising, revenue streams and ultimately company creditworthiness.  This episode was recorded on 10/23/23 and 11/10/23.

Credits discussed were chosen to depict AAM’s security selection process and are for illustrative purposes only. The securities discussed do not represent the entire universe of credits. There is no guarantee the investments discussed would be profitable, nor is it a recommendation to purchase a specific security, and should not be construed as investment advice.

 Warner Brothers Discovery (WBD) remains in transition, but we continue to like what management is doing and how it is positioned longer term.  This means debt repayment to reduce leverage while battling industry headwinds.  In our opinion, WBD intermediate spreads in the Treasuries +205 range are attractive relative to low-BBB peers in the Treasuries +190 range.

Fox (FOXA) and Paramount (PARA) are credits we are concerned are at risk of falling to high yield due to weakening credit fundamentals.  In our opinion, neither FOXA intermediate-dated bond spreads in the Treasuries +185-range nor PARA intermediate-dated bond spreads in the Treasuries +275 range adequately compensate investors for this downgrade risk.

Sources: The Federal Reserve, Bureau of Labor Statistics, U.S. Census Bureau and company reports

Any timely data or views should be considered as of this date unless otherwise specified.

Opinions and statements of financial market trends that are based on market conditions constitute our judgment and are subject to change without notice. Historic market trends are not reliable indicators of actual future market behavior. This  material may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different than that shown here. The information presented, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Although the assumptions underlying the forward-looking statements  that may be contained herein are believed to be reasonable they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. AAM assumes no duty to provide updates to any analysis contained herein.

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Disclaimer: Asset Allocation & Management Company, LLC (AAM) is an investment adviser registered with the Securities and Exchange Commission, specializing in fixed-income asset management services for insurance companies. Registration does not imply a certain level of skill or training. This information was developed using publicly available information, internally developed data and outside sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated and the opinions given are accurate, complete and reasonable, liability is expressly disclaimed by AAM and any affiliates (collectively known as “AAM”), and their representative officers and employees. This report has been prepared for informational purposes only and does not purport to represent a complete analysis of any security, company or industry discussed. Any opinions and/or recommendations expressed are subject to change without notice and should be considered only as part of a diversified portfolio. Any opinions and statements contained herein of financial market trends based on market conditions constitute our judgment. This material may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different than that discussed here. The information presented, including any statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Although the assumptions underlying the forward-looking statements that may be contained herein are believed to be reasonable they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. AAM assumes no duty to provide updates to any analysis contained herein. A complete list of investment recommendations made during the past year is available upon request. Past performance is not an indication of future returns. This information is distributed to recipients including AAM, any of which may have acted on the basis of the information, or may have an ownership interest in securities to which the information relates. It may also be distributed to clients of AAM, as well as to other recipients with whom no such client relationship exists. Providing this information does not, in and of itself, constitute a recommendation by AAM, nor does it imply that the purchase or sale of any security is suitable for the recipient. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, inflation, liquidity, valuation, volatility, prepayment and extension. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.