THE GOLDEN AGE OF CREDIT CONTINUESTHEGOLDENAGEOFCREDITCONTINUES

2021 will bring its fair share of uncertainty, whether it be ongoing pandemic worries, geopolitics or an economic backdrop that remains unpredictable. Those near-term concerns are likely to keep corporations conservative and focused on improving their balance sheets. Over the long term, the continued support of fiscal policy and central banks around the world, in a moderately low economic growth backdrop, tends to bode well for credit investors.

The configuration of uncertainty, high debt and low yields is a formula for intermittent volatility, which creates both risks and opportunity. We favor spread products and see opportunities for adding value through investment grade and high yield corporates, high quality structured product, emerging markets and European sovereigns. Some of the most attractive opportunities are in BBB corporates which were close to downgrade during the pandemic but were motivated to deleverage, reduce costs and ultimately exhibit debt-friendly behavior. Higher-quality IG have the opposite motivation as they try to boost earnings through expansion/reinvestment/increased leverage. The long end of the U.S. yield curve also remains attractive, as 30-year Treasuries are trading significantly wider than the equivalent-maturity German Bund.

The Bloomberg Barclays U.S. Corporate Investment Grade Bond Index is an unmanaged index considered representative of publicly issued, fixed rate, nonconvertible, investment-grade debt securities. This index is a component of the Bloomberg Barclays U.S. Aggregate Bond Index. The Bloomberg Barclays U.S. High Yield Index covers the USD-denominated, non-investment-grade, fixed rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB + or below. A small number of unrated bonds are included in the index. The index excludes emerging markets debt.

Risks— Investing involves risks. Some investments are riskier than others. The investment return and principal value will fluctuate, and shares, when sold, may be worth more or less than the original cost. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, and political and economic uncertainties. Emerging and developing market investments may be especially volatile. Emerging markets are countries that are beginning to emerge with increased consumer potential driven by rapid industrial expansion and economic growth. Investing in emerging markets is very risky due to the additional political, economic, and currency risks associated with these underdeveloped geographic areas. Investments in securities of growth companies may be especially volatile. Due to the recent global economic crisis that caused financial difficulties for many European Union countries, eurozone investments may be subject to volatility and liquidity issues. Value investing involves the risk that undervalued securities may not appreciate as anticipated. It may take a substantial period of time to realize a gain on an investment in a small or midsized company, if any gain is realized at all. Diversification does not guarantee profit or protect against loss.

The views expressed herein are those of investment professionals at PGIM Fixed Income at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. This commentary is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services. This commentary does not constitute investment advice and should not be used as the basis for any investment decision. This commentary does not purport to provide any legal, tax, or accounting advice. PGIM Investments LLC is a registered investment advisor with the U.S. Securities and Exchange Commission.

Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information, nor do we make any express or implied warranties or representations as to the completeness or accuracy. Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.

1045639-00001-00  Ed. 3/2021