CreditSights sees US Utility Bonds as a Safe Haven
CreditSights is maintaining its Overweight rating on US utility bonds. “Despite the challenges of lower usage, difficulty in asking for rate increases during hard economic times and the necessity of spending on maintenance and capex, most of our utilities should weather the storm relatively well, ” Creditsights says in Utilities: Why We Remain Overweight. “That does not mean that some will not be very stressed and others somewhat stressed. Despite coming challenges, the sector is still a relatively safe one, and, at least in Q1, also outperformed corporates as a whole.”
We expect a rough first quarter for many of our names, but the overall stability of the sector keeps it a good place to look for reasonably safe and attractive yields in a time of turmoil.
“….new issues of utility bonds are still offering fairly generous spreads, as many utilities are taking advantage of their ‘celebrity’ status and low interest rates to issue debt. At the moment, at least, utility bonds and CDS are offering, for the most part, the best of both worlds: safety and some performance. Also, they are issuing when many other sectors cannot or will not, giving investors relatively safe havens for cash at attractive spreads.”
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