-

KBRA Altman Launches High Yield Return Forecasting Model: A Differentiated Approach Using Machine Learning Allows the Model to Keep Pace with Changing Market Conditions

NEW YORK--(BUSINESS WIRE)--KBRA Altman, a division of KBRA Analytics, is pleased to announce the launch of its new High Yield Return Forecasting Model. Unlike traditional approaches that examine bivariate relationships between the level of credit spreads and other economic variables, the model uses machine learning techniques applied to a large data set of economic and market variables. The model identifies historical forecasting relationships between those variables and future returns on a diversified index of high-yield corporate bonds.

The advantages of the model are severalfold. First, in evaluating its efficacy, we do not allow model forecasts to use forward-looking data. This simulates investor behavior since investors don’t have access to future information when making portfolio decisions. Second, while the model starts with many potential forecasting variables, it selects a small subset of these which proves to be the statistically “best” one. Third, the model changes over time. The world changes over time, and a model that seeks to predict future financial outcomes cannot be static. A consequence of this is that today’s forecasting variables may not be tomorrow’s forecasting variables. Finally, the model is easy to interpret and apply. Given the current values of the best set of forecasting variables, the model produces a year-ahead forecast for the return of a diversified index of high-yield corporate bonds.

The year-ahead return forecast now stands at 1.6%, suggesting that the high yield asset class is offering paltry returns, reflective of the low rate environment, stretched valuations, and still evident stimulus-fueled environment. The current best set of forecasting variables includes HY spreads, the level of US T-bill rates, the lagged default rate on HY bonds (as tracked by KBRA Altman), HY realized return volatility, and a measure of aggregate corporate leverage in the US.

KBRA Altman will publish quarterly reports providing updated model HY return forecasts, as well as detailed analysis of the model components. Subscribers of KBRA Altman can access the report here. We’ll discuss the model and the current model forecast at our upcoming webinar “KBRA Altman: Picking Up the Pieces: Perspectives on Credit Markets Post-COVID.”

Through its exclusive collaboration with Professor Edward Altman, PhD, KBRA Altman provides in-depth analysis of the defaulted U.S. corporate bond and loan market via a collection of price indices and data that track current and historical defaults as well as recovery experiences of corporate issuers. Click here to sign up for free access to the KBRA Altman portal where you can view our insights and topical research.

About KBRA Analytics
KBRA Analytics, LLC (KBRA Analytics) is our premier product platform for high quality data and advanced analytics. Our seasoned teams of industry specialists across each product provide unparalleled insight creating a foundation of deeper analysis and rapid discovery for users. KBRA Analytics is an affiliate of Kroll Bond Rating Agency, LLC (KBRA). KBRA is a full-service credit rating agency registered in the U.S., designated to provide structured finance ratings in Canada, and with credit rating affiliates registered in the EU and UK.

Contacts

Van Hesser
+1 (646) 731-2305
van.hesser@kbra.com

Harry Mamaysky
+1 (646) 731-2336
harry.mamaysky@kbra.com

Sales
To learn more about the KBRA Altman Default product, email KBRAAltman@kbra.com or contact:

Daniel Doherty
+1 (646) 731-1314
daniel.doherty@kbra.com

KBRA Analytics, LLC

Details
Headquarters: New York City, New York
CEO: Jim Nadler
Employees: 400+
Organization: PRI

Release Versions

Contacts

Van Hesser
+1 (646) 731-2305
van.hesser@kbra.com

Harry Mamaysky
+1 (646) 731-2336
harry.mamaysky@kbra.com

Sales
To learn more about the KBRA Altman Default product, email KBRAAltman@kbra.com or contact:

Daniel Doherty
+1 (646) 731-1314
daniel.doherty@kbra.com

More News From KBRA Analytics, LLC

KBRA Assigns AA+ Rating to State of Illinois, Build Illinois Bonds (Sales Tax Revenue), Junior Obligation Series A and B of June 2026; Affirms Parity Debt; Stable Outlook

NEW YORK--(BUSINESS WIRE)--KBRA assigns a long-term rating of AA+ with a Stable Outlook to the State of Illinois (the "State"), Build Illinois Bonds (Sales Tax Revenue Bonds), Junior Obligation Series A and B of June 2026 (the "Junior Bonds"). KBRA additionally affirms the long-term rating of AA+ with a Stable Outlook for the State's outstanding parity Junior Obligation Build Illinois Bonds. Key Credit Considerations The rating actions were because of the following key credit considerations: Cr...

KBRA Comments on Lawsuit Filed by Pagaya Against Klarna

NEW YORK--(BUSINESS WIRE)--On May 13, 2026, Pagaya Technologies Ltd. (“Pagaya”), together with certain affiliates, filed a lawsuit against Klarna, Inc. (“Klarna”) and Klarna Group plc in the U.S. District Court for the District of Delaware. The lawsuit relates to alleged misappropriation of intellectual property and trade secrets under the Defend Trade Secrets Act of 2016. KBRA maintains ratings on two revolving ABS transactions backed by “buy now, pay later”, point-of-sale consumer loans that...

KBRA Assigns Ratings to TPG Twin Brook Capital Income Fund's $225 Million Senior Unsecured Notes Due 2029 and 2031

NEW YORK--(BUSINESS WIRE)--KBRA assigns ratings of BBB to TPG Twin Brook Capital Income Fund's ("TCAP" or "the company") $50 million, 6.67% senior unsecured notes due June 2029 and its $175 million, 7.03% senior unsecured notes due June 2031. The rating Outlook is Stable. Proceeds will be used for the repayment of secured debt. Key Credit Considerations The ratings and Outlook are supported by TCAP’s ties to TPG Angelo Gordon’s ~$100+ billion credit investment platform, with ~$30+ billion of di...
Back to Newsroom