2023-05-07 02:55:53 ET
Summary
- Since the change in FED's policy stance, PDI has underperformed the overall market by ~52% on a total return basis. The price divergence and ~14.5% yield theoretically make PDI attractive.
- However, high yield implies high risk. There are three elements that are not that straightforward and that should be considered by current and prospective investors.
- PDI's massive exposure to non-agency MBS shows early signs of increased credit risk - both from the probability of default and loss given default perspective.
- PDI's exposure to high-yield credit faces not only systematic headwinds but also several idiosyncratic risks.
- The presence of external leverage magnifies the potential losses, and the underlying structure of it introduces additional points of caution.
For further details see:
PDI: 3 Important Risk Factors To Consider Before Going Long