American Century’s Greenblath: Limited Default Risk in Credit

Jason Greenblath, vice president and senior portfolio manager at American Century Investments and director of Corporate Credit Research, said corporate credit currently carries limited default risk and that rising Federal Reserve rates will push investors to seek yield across issuers and maturities.

In a recent interview with host Nicole Petallides, Greenblath addressed how recent and potential Fed rate increases could affect corporate bond markets and what fixed-income investors should consider for the rest of the year.

He said the market has priced in some rate moves but that rates may move higher before broader credit deterioration appears. He added that one or two additional rate hikes and greater market volatility would likely be necessary before widespread stress shows up in credit markets.

Greenblath estimated only about 5% of the corporate credit market is at direct risk of default, while the remainder will be affected mainly by yield shifts and investor demand. He described current credit conditions as favoring smaller, selective trades rather than large, high-beta bets, noting that credit spreads are near levels not seen in roughly 30 years.

He highlighted long-dated corporate bonds yielding about 6% or more as areas of interest, and recommended attention to specific market dislocations. Greenblath pointed to primary market mispricings when new issues hit the market and to situations where issuers with excess cash are repurchasing debt at a premium as opportunities to capture extra yield without taking broad market exposure.

For investors seeking active exposure to corporate credit, American Century’s Diversified Corporate Bond ETF (KORP) is one option. The fund carries a 29 basis-point expense ratio and returned 4.3% over the past 12 months, according to ETF data.

Greenblath reiterated a firm-by-firm approach to credit selection as interest rates change, and said investors will likely shift from duration-driven strategies toward yield generation and selective credit allocation as yields rise.

His comments were framed by recent inflation readings, episodes of market volatility and a series of Fed rate increases that have lifted yields across fixed income, reducing the relative appeal of seeking returns solely through duration.