According to the Securities Times app, Matthew Mish, the crediting strategy director at UBS Group, stated that if Kamala Harris wins the US presidential election, it will boost bonds of basic industries, capital goods companies, and utilities. If Donald Trump wins, it will be bullish for bonds of energy, aviation defense, and auto borrowers.

In the latest episode of Bloomberg Intelligence's Credit Edge podcast, Mish discussed areas that the Democratic Party is expected to benefit, saying, 'We believe this is largely related to retaining inflation reduction bills and supporting many stimulus policies of the Biden era.'

On the contrary, Mish believes that a Democratic victory may drag down bonds in the telecommunications, technology, banking, and auto industries. He added that reduced trade matchmaking and strengthened regulatory scrutiny would put pressure on the first three, while the transition to electric cars and weakening efforts to resist imports by American manufacturers could be negative factors for auto manufacturers.

Referring to Trump, Mish stated that Republicans seem to support internal combustion engine vehicles and more profitable products like trucks. Therefore, if Trump wins the election on November 5th, it will be advantageous for bonds of energy, aviation defense, and auto borrowers. Mish mentioned, 'The Trump administration seems to definitely support energy independence, and the repeal of some regulations is positive for the energy industry, especially the pipeline sector.'

Currently, the average poll shows Harris slightly ahead, but both sides are evenly matched.

If Republicans win decisively, UBS believes that bonds rated CCC (the lowest junk level) will perform the best, mainly due to their cautious positions, and small-cap stocks may see larger gains. However, Mish stated that the recent rise in CCCs is more driven by telecom acquisitions rather than bets on the election or rate cuts. 'Currently, most changes in CCC ratings are likely more related to specific risks, or what can be called specific industry risks.'

Mish mentioned that after the debate between Trump and Harris on September 10, the credit performance of the energy and auto industries was poor, while the utility sector performed well due to the shift in support to the Democratic Party. Mish stated, "We believe there is also a divergence in the market between winners and losers, which is quite consistent with public opinion surveys and credit transactions."

In the broader corporate bond market, UBS Group is concerned about private credit as borrowers in distress have to repay loans with more debt, or amend and extend existing financing agreements. Mish expects portfolio deterioration over the next 12 months, with more private debt defaults.

Mish said, "You can point out some more concerning indicators. The interest coverage ratios of many companies are quite low, which is undoubtedly a potential concern."

However, Mish expects that unless the slowdown in the US economy exceeds expectations or enters into a recession, the issues in private credit will not spread to other parts of the corporate bond market, or evolve into systemic problems.