MS: Higher Rates Won’t Hit High-Yield Debt….Yet

High-Yield Debt should get hurt as interest rates rise - right? Maybe not

Last year the 10-year Treasury yield rose by 124 basis points from the trough in early July through to its peak. Many Wall Street analysts are predicting another leg higher for the benchmark this year but what will higher rates mean for corporates?

• A One Percent Rate Hike Could Cause A $10 Trillion Crash

Since the financial crisis, as interest rates have been pushed ever lower thanks to quantitative easing and a risk off mentality among investors, the market has rationalized high leverage with thinking that it doesn’t matter because rates are so low. The problem is if Treasury yields continue to rise the current level of leverage...