The average option-adjusted spread on the High-Yield index widened 47 bps on the month, and currently sits at 418 bps. After accounting for default losses, our measure of the excess spread offered by the High-Yield index is…
Highlights Chart 1Looking For Peak Credit Spreads The sell-off in spread product continued through November, driven by that toxic combination of weakening global growth and tightening Fed policy. With spreads now looking…
Below are some investment conclusions on EM credit from our Emerging Markets team.1 First, EM credit markets appear technically vulnerable. In particular, the excess returns on EM sovereign and corporate bonds are splintering…
Cyclical swings in EM corporate and sovereign credit spreads are driven by changes in borrowers’ revenues, cash flow, and profits. When global and EM growth accelerate, revenue and free cash flow improve, causing credit…
As is tradition, during client visits in Europe last week, I had the pleasure of reconnecting with Ms. Mea, a long-term BCA client.1 It was our third encounter and, as always, Ms. Mea was eager to delve into our reasoning, challenge our…
Highlights Chart 12015 Repeat? Credit spreads widened as Treasury yields rose in October, bringing to mind the experience of 2015 when tight monetary policy and flagging global growth combined to cause a large drawdown…
Highlights Duration: Last week's bond market rout was driven by strong U.S. data. Global growth (ex. U.S.) continues to weaken. Weak foreign growth that migrates stateside via a stronger dollar remains the biggest risk to our below…
Highlights Chart 1Second Half Rebound The leveling-off of bullish sentiment toward the dollar and the perception of fading political risk have caused spread product to rally hard since the end of June. Indeed, corporate bonds…
Highlights Duration: The housing market is the key channel through which monetary policy impacts the economy. As such, it is unlikely that Treasury yields will peak until housing shows meaningful weakness. While residential investment…