NEWSLETTER of February 10, 2023

The following content has been added at finexpert:

UBS
2023 FIXED INCOME DEFAULT STUDY
We forecast defaults in developed markets to increase from last year’s all-time lows, but remain below long-term trends: Euro high yield at 3.4% driven by expected weaker fundamentals and higher rates, but mitigated by the fact that there are relatively limited refinancing needs. These forecasts range in the middle compared to those of a selection of sell-side strategists. US high yield at 3.3%, towards the lower end of forecasts from the same selection of sell-side strategists. >more

KfW Research
DIE SITUATION AM KREDITMARKT WIRD FÜR DIE UNTERNEHMEN ZUSEHENDS UNGEMÜTLICH
In the final quarter of 2022, the KfW-ifo credit hurdle for small and medium-sized enterprises rose for the third time in a row. 31.3% of the SMEs surveyed that were in loan negotiations rated the banks' behavior as restrictive. This is 3.4 percentage points more than in the previous quarter. At the same time, the credit hurdle for SMEs has thus reached a new high since the current survey methodology was introduced in 2017. >more

Bain & Company
GLOBAL M&A REPORT 2023
Last year was a challenging one for all dealmakers as inflation, interest rates, geopolitical tensions, and increased regulatory oversight placed unprecedented demand on the skills of deal executives. Throughout it all, though, M&A persevered—not always in the same numbers or with the same processes as in the past, but deals got done. Overall deal value fell during the year, with multiples dropping from record highs in 2021 and fewer large deals. But the pace of small deals was surprisingly resilient. And dealmaker sentiment as we enter 2023 is optimistic.  History tells us that companies making bold moves during times of turbulence tend to win over the long term. The mission of this, our fifth annual report: Improve M&A by sharing the insights of the world's best dealmakers. >more

European Central Bank
FINANCIAL STABILITY REVIEW
The November 2022 Financial Stability Review (FSR) sets out how the deterioration in economic and financial conditions has increased the risks to euro area financial stability. This year has seen notable declines in financial asset prices across many regions and asset classes, an increase in market volatility and, at times, strained market liquidity. Sharp asset price movements have also triggered unexpectedly large margin calls for some market participants, notably non-financial corporations and non-bank financial institutions, testing their liquidity preparedness. These asset price shifts have reflected increasing uncertainty about what will be required of monetary policy to moderate inflation in advanced economies. >more

A COMPREHENSIVE 2021 LOOK AT THE EMPIRICAL PERFORMANCE OF EQUITY PREMIUM PREDICTION II
Amit Goyal, Ivo Welch, and Athanasse Zafirov
2023
Our paper reexamines whether 29 variables from 26 papers published after Goyal and Welch (2008), as well as the original 17 variables, were useful in predicting the equity premium in-sample and out-of-sample. Our samples include the original periods in which these variables were identified, but end in 2021. Much of the extant literature seems obsolete, with a majority of variables no longer having empirical support even in-sample. A small number still perform reasonably well. >more

THE PERFORMANCE OF PRIVATE EQUITY PORTFOLIO COMPANIES DURING THE COVID-19 PANDEMIC
Paul Lavery, and Nick Wilson
2023
We study the performance of UK PE-backed companies during the COVID-19 pandemic using two methods: a standard difference-in-differences model where we match PE-backed firms to similar, non-PE-backed firms based on pre-pandemic ob-servable firm characteristics, and a novel synthetic difference-in-differences approach from Arkhangelsky et al. (2021). In both cases, we find evidence supporting the outper-formance of PE-backed companies during the pandemic period, albeit using a synthetic approach reduces the magnitude of this outperformance. This is consistent with previ-ous evidence of the performance of PE-backed companies during economic downturns. When we study company insolvency filings over the sample period, we find that PE-backed firms faced a higher probability of insolvency during the pandemic relative to control firms. However, non-PE-backed firms in distress had a higher incidence of liquidation, while PE-owned firms more often negotiated formally with creditors to continue trading. >more