Jeff Skoglund, CFA

Credit rating agencies are a capital-markets fixture; the ratings they assign to the debt of corporations and governments are widely used by investors as a standard measure of credit risk. But agency credit ratings aren’t perfect—and shouldn’t be a substitute for investors doing their own analysis.

The plunge in oil prices has hurt many highly-leveraged energy companies and their creditors. But it also reinforced an important lesson that investors and asset managers probably learned when they were schoolchildren: Always do your own homework.

US banks have come a long way since the financial crisis, and that’s good news for fixed-income investors. We think better fundamentals and stricter regulations are creating a good formula for banks’ preferred securities.

This year’s leveraged buyouts (LBOs) are being financed with more debt and include fewer protections for creditors. Regulators, the press and market participants are watching this closely, and so are we. But we don’t think it’s worth losing sleep over—at least not yet.

High-yield bond defaults are historically low today, even for troubled companies. Despite the worries we hear in some corners about looming high-yield defaults, we think default rates will stay low for at least the next few years.