WEBVTT

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<v Narrator>Recently, much attention has been paid</v>

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to the increased leverage

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and corresponding erosion of credit quality

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of Corporate America.

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The Triple B percentage

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of the US investment-grade corporate market

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increased to 50.1% at year-end 2018,

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marking the first-time Triple B's comprised

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the majority of the investment-grade universe.

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In Canada, Triple B's comprise a record 42.8%

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of the Canadian investment-grade corporate bond market.

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Generalisations about the growth of the US Triple B market

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and the threat downgrades pose to lower-rated segments

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ignore subcategories within the Triple B segment.

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The US Triple B rated category is 5.8 times larger

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than the double B segment of the high-yield market.

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More relevant in our view,

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the Triple B minus category is only 1.4 times larger

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than the Double B category.

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In our opinion, the Triple B overhang

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is not as ominous a threat to the high-yield market

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as the headlines would suggest.

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What separates Canada from the US bond market

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is the absence of a well-developed high-yield market.

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The Canadian Triple B segment is 24 times the size

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of the entire Canadian high-yield market.

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And the Triple B minus category is 4.5 times

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the size of the Double B portion

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of the Canadian high-yield index.

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In Canada, the downgrade of a large Triple B credit

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could have a significant impact

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on the Canadian high-yield market.

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For more information on this topic,

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please read the Canso Corporate Bond Newsletter

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available at cansofunds.com.