Keeping Up With 2021 Credit Market Update

Robert Abad: Welcome, everyone, and thank you for joining us for this special credit market update. I'm Robert Abad, Product Specialist at WesternAsset. With me today is Western's Deputy Chief Investment Officer Mike Buchanan. We're going to spend the next half hour or so connecting the dots between the trends we're seeing play out across the credit markets and Western views on sector fundamentals and valuations. At the end of our discussion, I'll ask Mike to respond to some questions we've received from our audience. With that, why don't we get started? Mike, great to see you.

Mike Buchanan: Thanks, Robert, and thanks for joining us today. Looking forward to our discussion.

Robert Abad: All right. Well, to kick things off, I thought it would be helpful if you could spend a moment taking stock of the big picture. As you know, credit markets have rallied sharply from the lows in 2020 to close out the year almost unchanged in terms of spread levels. And if you look at performance year to date, I think it's fair to say that markets are still pricing in a lot of optimism about the longer-term battle, you know, with Covid and the near term prospects of growth both in the US and abroad. What's your take on all this?

Mike Buchanan: Yeah, I mean, it certainly was a remarkable year 2020, and to think of where we ended up and where we were at various points throughout the year, just you know, extraordinary and a lot of volatility. And I would say that where we are now, we're very encouraged by. You have to look at what put us, you know, what created all this volatility? And it was, as everyone knows, it was it was Covid. It was the pandemic. So I think you have to start with what are the trends that we're seeing there? Because ultimately, if that's what dragged us down, that will be the way out of this. And I think here, you know, again, the trends are encouraging. You see continued momentum in the right direction on a number of pretty much all metrics. You know, most notable, I would say, in California, where the case loads went from well above the national average--and that was not just the national average in general, it was also above the averages for high population states-and now those rates have declined to be in line with overall national averages, even as those overall averages have experienced decline. We're also seeing continued progress on the vaccine front, not just the development, you know, J&J, there's supposedly very close to a one-shot vaccine, which I guess is expected to get approval sometime in the near future. But the supply continues to be very increasing and generous. The rollouts they're dealing with those inefficiencies and the effectiveness of the vaccines, you know, not just overall, but in even dealing with some of the variance. So I think the news on the on the pandemic and the trajectory of where we're going looks encouraging. And I think consensus really seems to be that we are going to experience something close to a full reopening by July or perhaps even earlier than that.

Robert Abad: Well, that's all positive. So we've got the vaccines and we've also got a sizable fiscal package on the horizon to help stimulate growth. When we put these pieces together, Mike, what's Western's view on US growth this year?

Mike Buchanan: Yeah, I think we are also expecting to see a pretty healthy bounce in growth overall. If you look back at 2020, real GDP declined by over 10% in the first half of 2020, and it did rebound about 8.5% for the second half of 2020 to put full-year GDP at -2.5%. And as you can see in this chart, in order to get back to that trend path, that 2.3% growth trend path that we were on from 2014 to 2019, growth would have to be 7.5%. And we think that's achievable. In fact, that is our estimate for growth for 2021. And, you know, why do we think we could see such a robust recovery? You have to remember this was a very strange recession. If you look at the components of growth, goods GDP was actually higher by almost four percent, plus three point nine percent. Construction GDP was up 1.5%. It was really services GDP that was down 6%. Very, very repressed. Our expectation is that you see a very healthy rebound in services GDP, something, you know, in and around 10.5% for 2021. So that is why we're optimistic on growth. That's why we think we can get back to that trend path.

Robert Abad: So let's talk a little bit about the consumer picture. You know, we've definitely seen some stabilization on that front. What are the things you want to highlight with respect to that area?

Mike Buchanan: Yeah, you know, again, I mentioned, Robert, strange recession. And, you know, some of the other things that were strange about it was really how policy created a stronger, resilient consumer. And that's not something you typically see coming out of a recession. And usually there's some impairment. There's some damage to the consumer sector. But as we all know, fiscal policy with big benefit to the consumer. You see that on the left with personal savings well above what we've witnessed historically. And then also on the right, consumer loans issued by bank as a proxy for how indebted the consumer is. I mean, here you could see that, you know, leverage or indebtedness is actually lower. So you don't have a consumer that's really burdened by debt. So if you believe, as we do, that in the consumer space, there's a lot of pent up demand. We think the the foundation is really in place for that demand to manifest itself in that healthy services rebound that I pointed to earlier.

Robert Abad: You talked about policies helping the consumer sector. The same could be said about the corporate sector.

Mike Buchanan: Yeah, corporate sector, I think you could look at a lot of different metrics here and again, I would say policy played a big role, not just fiscal policy, but monetary policy and has just as with the consumer, you know, where we came out of a recession with a uniquely healthy consumer, I would argue that the corporate sector is also in a uniquely strong shape relative to what we've seen in previous recessions. Here we just look at a few different metrics. You know, one I'll actually start with is on the lower left just looking at overall revenue. And I think it's really remarkable if you look at the revenue that we experienced in the fourth quarter of 2020, it actually exceeded where we were in the fourth quarter of 2019, which was, as everyone knows, a pre pandemic quarter. So it really, I think, points to and shows the trajectory of progress that corporations are making from a fundamental perspective. And you also see that on the earnings front, lower right chart, again, earnings exceeded, this is S&P earnings, exceeded where we were in aggregate for the fourth quarter of 2019 and then above in that larger table above. What you see here is that in just a very short period of time, the expectations for earnings growth rates has increased for almost all sectors within the S&P. Clearly, you know, the prospects are encouraging, there's a lot of optimism for where earnings growth is going. And again, I think you see that pretty vividly on this chart.

Robert Abad: These are great data points, Mike. Why don't we do this and just turn to the credit sectors now? Because there's one area that did spectacularly well in 2020, and that was investment-grade credit. But it does look like we're getting a little bit of pushback at this point. What would you say to that?

Mike Buchanan: Yeah, I mean, I think you can understand some of the pushback and investment-grade credit, it doesn't mean we necessarily agree with that push-back. But if you look at this table and you just talk about some of the high-level metrics that show themselves in the investment-grade credit market. Starting with that top line, spread levels don't really look out of line with what we've seen historically, especially for periods where there is a fundamental strong tailwind or, you know, fundamentally strong underpinnings. You know, those spread levels look to be in line. But some of the other metrics, you know, the overall index yield consistent with this secular decline we've witnessed in rates, not surprisingly, you've seen that decline to very, very low levels. Something that maybe gets it doesn't get maybe as much attention, but I think people are talking about it is how double or triple Bs have created a larger population within the overall investment-grade credit market. And you see that you see triple BBB as a percent of the overall market increasing to now 50%, which obviously has led to a reduction in the overall rating profile for the index. And then, you know, consistent with lower coupons being issued and really an emphasis on some longer duration issuance, that duration of the investment-grade market continues to extend. The dollar price continues to go higher. Gross leverage, not net leverage, but gross leverage, you can see continues to go higher. So these are some of the high level metrics that when investors express concern or worry or push back, as you said, Robert, these are some of the things that they're pointing to. But I would say, you know, if you turn to the next page, there are some reasons and some metrics that we'd like to point to that suggests that there's still reasonable value in investment-grade credit. I do think you have to. Look, you have to acknowledge the overall rate environment that you're in when you're looking at spreads. And I don't put a tremendous amount of reliance on this chart. What we're showing here is the percent that spread makes of your overall yield. But I do think you at least have to be cognizant of it. You have to recognize it. And here you can see that a very significant amount of your overall yield in investment-grade credit is coming from spread. And if you compare that to what we've seen historically, I think the markets certainly don't look rich. In fact, you might even argue, you know, they they could look cheap. And then if you move over to the far right, that other chart, you know, there have been periods in time, prolonged periods in time where the spread of the investment-grade credit has index traded below 100 basis points from '93 into early 1998, from 2004 to 2007. So from our standpoint, it's not at all impossible or improbable that investment-grade credit, you know, can continue to be here inside of 100, especially with that healthy, fundamental backdrop that I referenced earlier.

Mike Buchanan: Another point, Robert, that I would say is, you know, you do have to talk a little bit about technicals because that is one area where we've just seen a, you know, a real, real strong, positive tailwind for investment-grade credit. This chart shows you retail flows, cumulative retail flows by fixed-income asset class. And you could see that investment-grade credit has really dominated those flows. What you don't see here is institutional demand. And I think we could extrapolate the general trends we're seeing here and say that we're seeing the similar trends on the institutional side. There's tremendous appetite for investment-grade credit that's only been enhanced more recently as the benefits of the hedge have favored overseas investors coming into the U.S. market, hedging US credit back into their home currencies in general, that's that's moved to a more favorable level. So, you know, again, I would say that we expect this favorable tailwind with respect to technicals and a lot of demand. We think that continues going forward.

Robert Abad: Beautiful. Mike, you know, high-yield also had a solid year despite all the Covid-related volatility, and it continues to be resilient. So how much more room do you see there in that market for spread compression?

Mike Buchanan: Yeah, high-yield did very, very well, especially if you consider where was high-yield at the end of March or early April, just a tremendous rebound that really gained momentum toward the latter part of 2020. One of our big themes for 2021 is carry. And it kind of made me recall a long, long time ago, a gentlemen that I worked with who you know, I was sitting there agonizing about, you know, trying to buy bonds that were going to tighten right away. They were going to experience capital appreciation. And he just reminded me that, you know, you just let fixed-income do what it's supposed to do. You you invest in names where you're getting a nice income, good yield. And if nothing happens to the price that works great for your investors. And his term was "carry your way to greatness." And I think that's a pretty good statement. When we think about the market here in 2021, there probably is not a tremendous amount of opportunity for spread-tightening in aggregate or capital appreciation. But given a very, very strong fundamental underpinning in the high-yield market, we think there are a lot of opportunities to go invest in the high-yield market, get a very attractive yield advantage versus other fixed-income sectors. Let that carry work for you. Enjoy the income that you get from investing in high-yield securities. And I think these charts here show you on the left the advantage of a blended double B single B index versus the long duration index. So again, message there being that, you know, you don't have to take a lot of great risk within higher quality, high-yield to get pretty attractive streams of income.

Mike Buchanan: And then on the far right, you know, as you might expect, you're doing that with considerably less duration. And I know that duration has become, you know, a real topic of interest in the first month and a half of 2021.

Robert Abad: These are great points, Mike. Especially that power of income argument. What other factors are you looking at?

Mike Buchanan: I always think, you know, when you're talking about high-yield, you have to look at fundamentals. I referenced it earlier on the far left. I think the most obvious proxy for fundamentals is always the default rate. And you look at where we are now versus where we've been in previous default cycles. And you can kind of see there's a little bit of a downward trend in the current default rate. So obviously defaults have climbed through the pandemic. But given our expectation for a robust recovery, we think that the beginning of that downward trend that we're seeing in that chart, we think that accelerates and continues. So message being, again, if you're thinking about high-yield as a carry asset trade for 2021, one of the big enemies to carry is always impairment. And when you're talking impairment, you're talking defaults. So our view is that that risk of impairment is going to be diminishing, decreasing throughout the year as fundamentals pick up and improve.

Mike Buchanan: On the far right, Robert, I maybe point this out too, because  I mentioned there's a lot of focus right now on the rate environment, a lot of focus on fiscal stimulus in particular, but also monetary stimulus, perhaps triggering inflation, although that's not our view at Western Asset. We think that, you know, inflation is going to be within the boundaries of what the Fed has outlined and they'll do a good job of keeping it at or near 2%. I think, you know, you have to at least be cognizant of the risks that are out there. And when you think about high-yield and you see how high-yield does during different inflationary periods, high-yield actually does best when inflation is rising, granted, you have to assume maybe inflation is rising for the right reasons because we're experiencing economic growth. But when inflation is starting below average and rising, that's in those periods historically, that's when high-yield has done best.

Mike Buchanan: You know, just a final note, since we talked about high-yield  earlier, we talked about investment-grade credit and the spread that you were getting there as a percent of your overall yield. I do think it's fair to look at high-yield in the same way and not surprising, high-yield, you're getting, with a five-year Treasury, that's in and around 60 basis points. You're getting most of your overall yield from spread. And compared with previous periods, you know, that does look very, very cheap. You know, again, I wouldn't put a tremendous amount of emphasis on this metric, but I think you do at least have to look at it. You have to acknowledge it, and you do have to factor it into your calculus of how you're viewing opportunity and value within the space.

Mike Buchanan: Mike, two areas that we've written about extensively at Western and even highlighted in our latest Global Credit Monitor are bank loans and the CLO market. Let's talk about that for a moment.

Mike Buchanan: Yeah, you're absolutely right. Bank loans have been one of the areas that really toward the end of 2020, we really started getting increasingly bullish on. And there's a number of things to talk about in the in the bank loan space. But again, you know, let's talk about the theme of carry that we have for 2021. Bank loans are a great carry asset within fixed-income. You know, you get a high level of yield. You really don't take on much, if any, duration risk. And right now, what we're seeing is that after a prolonged period of what I would call technical headwinds, I think you're turning the corner with bank loans and we're beginning to see a technical tailwind. And if you think about it, it makes sense. You know, six months ago, a year ago, there seem to be a unified view in the market that the central banks globally, were going to keep rates pinned at zero or in some cases even lower. And there was really no hope of rates going any higher. And the bank loan market enjoys when rates actually move higher because they reset as LIBOR or the or other rates move higher. So if the view was that rates are going to be pinned at zero or lower, you know what didn't seem to be a very attractive asset class for investors. And you see this on the on the top two charts throughout most of 2020, in a deeply negative in terms of retail outflows. But hopefully you can see what I'm referencing now is that you're starting to see a little bit of a pickup. And I think that makes sense as investors are starting to focus more on rates rising perhaps, or more on the fear of inflation. I think the loan market seems to be one of the few areas within fixed-income that you could actually benefit. So, you're talking about a relatively small portion of the overall fixed-income market. And you see this again, this is just by retail fund share asset class. But you see it in that below pie chart. You know, very, very small portion of the overall fixed-income market in aggregate is made up of bank loans.

Mike Buchanan: So it really wouldn't take much of a reallocation to create a heavy or strong, robust uplift in terms of technical demand for bank loans. Also, you should also note that the CLO, the collateralized loan obligation demand continues to be there. And that was something that was there in 2020. The arbitrage between assets and liabilities still is very compelling. So we would expect CLOs to continue to also contribute to this fundamental or this technical tailwind and be very, you know, result in a lot of demand for for bank loans going forward. Also, just on sort of a cousin or brother or sister of the bank loan market is the CLO tranche market. I point this out only because you have seen a strong bounce in the CLO tranche market. But what I would say is that if you just look and note the absolute levels of spread that you're seeing and the different rating categories, I would argue that those still look reasonably compelling. You know, triple A CLO tranches, you know, trading at spreads north of 100 over or new-issue spreads being north of 100 basis points, over triple B probably, you know, in and around 250 or even a little cheaper. And then double B, you know, let's call that about 600 basis points. And these are for new issue CLO origination spreads. In our opinion, you know, these look pretty attractive in aggregate.

Robert Abad: That's great, Mike. Let's do this, let's pivot away from corporate credit and loans to an area that did not enjoy much of the 2020 rally. Now, there are a lot of moving parts to structured credit, but what thoughts do you have on the residential and commercial commercial mortgage-backed space?

Mike Buchanan: Yeah, definitely, Robert, this has been one of the areas that really hasn't joined the party, so to speak, and we talked about on our previous webcast, we've talked about how investment-grade credit, we've looked at investment-grade credit as what we would call more of a first-responder market. We thought that when you started to see the fundamentals come together, when you started to see the outlook improve prospects for for a recovery brightening, that initially you'd see investors rush toward investment-grade credit, and that's where you'd see a lot of the total return trajectory, a lot of the real opportunity. So call that a first responder market. And then second responder markets we mentioned were high-yield and perhaps to a lesser extent, bank loans. And I think those markets did what we more or less expected. They lagged initially when investment-grade started rallying in late March of 2020 into April and into May. It took a while before you started to see investors warm up to those below-investment-grade markets, high-yield and and bank loans. But definitely they made up lost ground, really started to gain momentum in the latter half of 2020. We've also talked about the structured credit markets being a third responder market. We really felt like, you know, there there was a lot of latent value, a lot of intrinsic value in this market. But it would take some time before investors really started migrating and money started moving toward these areas of opportunity. So, again, calling these more third-responder markets in particular, I would say within structured credit, commercial real estate CMBS is probably the one where I think it's intuitively obvious or at least it kind of makes sense that, you know, valuations haven't really fully recovered. There's still a lot of uncertainty with respect to office real estate, with respect to retail real estate. You know, what's the future of lodging? You know, these are all open questions. But I think as we get closer and closer to a real recovery, some of those questions are going to be answered. And I think what's being priced into this market and what's being discounted is probably something closer to a worst-case scenario. And I think as the market starts to realize that perhaps that worst-case scenario doesn't come to fruition or doesn't look like it's coming to fruition, you're going to see some money move to take advantage of some of these latent opportunities. So I do think this is an area that, you know, it's bounced a little bit, but still deeply negative, as you can see in the second line, you know, triple B minus CMBS still negative almost 10% since the peak of 2020. I think it's even more interesting if you look at, you know, just in the equity REIT space, you just look at the different components of equity REITs. Office, not surprisingly, very, very negative. Malls, shopping malls also very negative. But again, I would say I think there's real opportunity here. Our team is doing a great job going through each and every security and really trying to understand what are the drivers--pick the best ones--and take advantage of the opportunity and being very selective.

Robert Abad: All right. Well, to close out our whirlwind tour across global credit, let's spend a moment on emerging markets. It's been hit by the risk of trade wars, idiosyncratic risk, Covid pressure, and now we have higher rates. That said, if you look, for example, at that chart on the left, EM does look attractive when you look at current spread levels by rating bucket. And even if you look at the chart on the right, you compare the spread differential between EM corporates and US credit, depending on the rating bucket. Where else are you seeing good relative value in the credit markets, Mike?

Mike Buchanan: Yeah, I'm glad you used the term relative value, Robert, because it's, you know at Western Asset, we are always looking at every fixed-income sector. And, you know, not only do you have to look at it in isolation and make a valuation call, but you also have to compare and contrast. And, you know, we have to guide our clients and our investors to the areas where we think we see the best risk-adjusted return. So, you know, on that chart, on the far right there, you point out, you know, you just look at emerging market credit versus versus US credit by rating. Definitely looks to be cheap, does not mean that we're negative necessarily on US credit. But I do think you kind of have to note that and maybe suggest some of the opportunities that we see in the emerging market credit space. Also just talking about relative value, I just talked about commercial real estate. So, you know, two areas that we probably made more bullish statements about in this webcast, putting those and lining those up next to each other. You can see just these are general proxies, but triple B CMBS appears to be somewhat cheap to high-yield. And I think that's true. That's consistent with how we feel. We see that again, you know, latent opportunity in CMBS. We talked about it being a third-responder market. So, you know, as you've seen with a lot of our strategies at Western Asset, we have begun to look at the high-yield space. We're selectively taking some profits, reallocating some of that money into opportunistic areas such as CMBS.

Mike Buchanan: If you just go to the next page. Now, we talked about loans. I think this is a really interesting chart. And again, you go back to our theme of carry. You know, in 2021, I don't think you can rely as much on spread-tightening. I don't think you can rely as much on that capital appreciation that we witnessed in the last three quarters of 2020. I think it's going to be about income. And again, I think some sectors, you know, do better than others. When you look at just their income characteristics and bank loans really do screen favorably there. Here you can see that, you know, the bank loans have a higher percentage of their market trading at cheaper levels versus high-yield. It's probably something you don't see too often if you think about it. You know, bank loans, structurally senior, you know, oftentimes backed by very attractive collateral. So the fact that you're getting more spread, you're getting more overall yield there is interesting. And I think something that we're taking note of. But again, you know, just pivoting back to high-yield doesn't mean that we don't see opportunity there in aggregate. You know, probably less opportunity, but idiosyncratic case-by-case level, we are still finding some pretty interesting opportunities in the high-yield space as well.

Mike Buchanan: The next page, just staying on that relative value theme, we talked about how we like CLOs, I think it's interesting when you compare the triple A CLO tranche space versus the BB CLO tranche space, maybe not surprising, but, you know, AAA have pretty much, you know, almost entirely recovered, whereas BB, you know, still you're looking at something (and these are secondary, earlier we talked about primary issuance for CLO tranches for the secondary market) you're in and around 700 basis points over. So, again, if you like bank loans and you can find the right CLO manager to buy a tranche issued by I think, you know, BBs are very attractive right now. And then even, you know, we spent a lot of time talking about US credit, corporate credit and how that may look rich to certain sectors. And, you know, again, has done very, very well up until this point. But I think you have to recognize investment-grade credit, a very high quality fixed-income asset. It's not unreasonable to compare and contrast that with agency mortgages. So here you could even see case being made that when you compare it to high-quality agency mortgages, credit does look a little cheap there. And again, it's consistent with our ongoing focus on still, despite reducing some exposure in the investment-grade credit space, still keeping some of those some of that exposure and finding good value at the individual level and the industry level with that. Robert, I'm going to turn it back to you, sir.

Robert Abad: Yeah, this has been great. And I really appreciate all those insights, Mike. So we do have time for some questions. And I see that three have come in, which I think will help to round out our discussion. The first one is very, very timely. It says long-term rates have backed up materially since the start of the year. Assuming rates move even higher, which credit sector would you be most worried about?

Mike Buchanan: Well, I mean, I think you have to highlight investment-grade credit. And if you'll recall earlier, we showed that slide that showed how investment-grade credit has changed over the years, along with a number of different metrics. But one of those was duration, with lower coupons being issued with a migration towards longer-dated issuance. You've seen the overall duration of the investment-grade market continue to extend. And although we would argue that, you know, the credit risk with an investment-grade credit is very limited. Again, we think, you know, that fundamentals are actually moving in the right direction. The rate risk is certainly there with a longer duration overall market. So I do think that that's something again, it's not consistent with our overall view. We're not expecting a materially higher rate environment. We think we've seen a lot of that already in the early part of 2021. But certainly investment-grade credit is vulnerable in that type of scenario that you just asked about. On the flip side, bank loans, high-yield, you know, minimal vulnerability, not entirely without some vulnerability, but have minimal correlation with with rates. And I think, again, I mentioned this earlier, if rates are rising for the right reason, if inflation is driving higher for the right reason, I think there's a strong case for both bank loans and high-yield. And then, you know, it's kind of flip it back, you know, another high quality area like investment-grade agency mortgages. We talked about, no question, high correlation with rates. So that would be another area where you could see some vulnerability.

Robert Abad: There's a question here which essentially speaks to the fact that markets are interconnected. It says, how are you factoring in equity market valuations into your credit market view?

Mike Buchanan: Yeah, I think, you know, you have to recognize that there's a correlation between the equity markets and the corporate credit markets, so, you know, we do not at Western Asset, we're not managing equity portfolios, but our analysts and our portfolio managers are keenly aware and acutely aware of what's going on in the equity market. I do think you have to recognize that, you know, equity markets affect financial conditions. They're a big contribution to financial conditions. And those financial conditions can affect consumer confidence and probably do affect consumer confidence. So the equity market volatility, if the drawdown that we started to see in equities became severe, I think that would translate into a reduction in consumer confidence. It would have to affect our overall call, an assessment for GDP. So no question we're watching it closely. But I think, you know, let's say we do get there. Let's say we do get to a period where we see deep drawdown in the equity markets. One thing I would say that should be encouraging and and give us some hope when we think about corporate fixed-income, is that the balance sheet health is healthy, record year in 2020 and 2021 in terms of issuance. And in many cases, what that issuance was used for was to refinance short-term debt with longer-dated debt and oftentimes to put cash on the balance sheet. So, you know, the good news is, is that, you know, let's say we did go into a period of deep drawdown, a lot of equity market volatility, capital markets are shut down and companies can't get access to financing. I think in many cases, corporations have done a really good job of fortifying their balance sheet and not having to be reliant on accessing the capital markets in 2021. I also think you have to talk about the Fed, Robert. We've seen the Fed be very, very responsive to financial conditions. So, you know, I think the Fed would certainly respond with even more accommodation. You know, we saw the Fed programs in April of 2020. The Fed's watching, the Fed's engaged. So I think those are all things that could be byproducts of a, you know, a deep drawdown if it were to happen in the equity market.

Robert Abad: Final question, the price of oil and other commodities such as copper, have rebounded significantly over the past few months. Are there certain areas that you are focusing on in the commodity space more than others?

Mike Buchanan: Well, I think you actually just hit the two that that we've been bullish on, maybe talk about copper. We've been saying for a while that we think the you know, the supply demand dynamics and copper are very favorable and have both within the investment-grade market as well as a high-yield market, have found a lot of opportunities to express that bullish view on copper. So that's one area within the commodity space that I would say Western Asset portfolios have a decent amount of exposure. And that's really driven by our bullish view on copper and also the companies that we're looking at and the management teams that are operating those companies. The energy or oil sector, also one where we've generally been more bullish. You know, this has been oil in general and the energy space has been a real disappointment in terms of performance. You go all the way back to 2015. It's just been a year after year of underperformance. But along the way, what's happened is that either through default or restructuring, a lot of these companies that were weaker and more vulnerable have made their way out of the market or at least have been recapitalized and are stronger now. Also, there's more emphasis by management of the sector of just paying down debt, controlling the balance sheet, spending with, you know, their capex is within their overall cash flow. So not overspending. So we think this is a sector that is really focused on balance sheet repair and you are starting to see some uplift in the commodity. So after years and years of underperformance, we think that energy could actually be an outperformer. And I do think that there's probably quite a few underweights to energy. So when you think about the demand side of it, as that sector gained some traction, as it gained some momentum, you could actually see, you know, a lot of money flowing into the sector and give even more of an uplift to a sector that already seems to be enjoying a pretty strong 2021. So I'll send it back to you, Robert.

Robert Abad: Well, Mike, this has been a very informative discussion, unfortunately, that's all the time we have today. Thank you again for sharing your insights and a big thank you to all of our listeners for joining us on this webcast. As we close out this presentation, I just want to note that we'll be directing you to this quarter's Global Credit Monitor, where you can read our holistic assessments of trends, technicals and relative value across the entirety of the global credit market. Finally, we really do appreciate your feedback. So if you don't mind, please fill out a brief survey at the end of this webcast. And for other market commentary and insights, please visit our mobile app or our website, WesternAsset.com. Thank you so much and have a great day.