Junk Energy Bonds Rebound, Though Outlook Remains Murky (video)

Though high yield energy bonds enjoyed a market leading rebound in May, the outlook for the sector remains somewhat somber. The risk to oil prices may be weighted towards the downside as trade tensions weigh on economic growth at the same time OPEC+ plans to boost output. With oil in the $60 area, some companies will still be able to generate free cash flow, others will tread water and some may even see a slow decay in credit quality. The fate of Transocean’s unsecured bonds will hinge on the company’s expectations for contracting activity to pick up ahead of its 2027 debt maturities. Spencer Cutter, senior credit analyst, discusses the situation here.