Egan-Jones Analyzes How High-Quality Bonds Can Still Suffer Major Losses
Egan-Jones Ratings released an analysis highlighting how even high-quality bonds can experience severe losses due to factors beyond credit risk. The firm used Apple's senior notes issued in August 2020 as a case study, noting that the bond fell from near par value to about half its original price by mid-2026 despite Apple maintaining strong financial health. The decline is attributed not to deteriorating credit quality but rather rising long-term interest rates and investor sentiment. Egan-Jones emphasizes that risks such as market conditions can outweigh issuer strength, especially in a concentrated portfolio with similar characteristics. The firm suggests diversifying into higher-yielding assets like business development company loans may better offset potential losses. The analysis underscores the importance of understanding all investment risks beyond just credit quality and highlights how outcomes for individual securities can diverge significantly from their issuers' financial standing.
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