Schroders Credit Lens June 2023: your go-to guide to global credit markets
Our monthly analysis highlights the charts and data that matter to investors in corporate credit.
The June edition of the Schroders Credit Lens highlights corporate bond yields edged up in May, while spreads were little changed despite US debt ceiling concerns.
Links to all three versions of the Credit Lens are provided below
*We also now publish a separate EUR version specifically for Insurance Company Investors.
Corporate bond yields edged up in May, with increases in USD and GBP yields driven by higher risk-free rates, reflecting expectations of tighter-for-longer monetary policy to bring inflation back to target
Spreads were little changed on the month despite US debt ceiling concerns. Spreads have been unusually stable in the face of the sharp tightening in bank lending conditions this year. Historically spreads have widened a lot in such situations
US high yield issuance has picked up from very low levels, but the amount outstanding has been contracting over the last year
Credit curves continue to be very flat, with longer maturity bonds offering little or no yield over shorter maturity bonds
Default rates in US high-yield are rising. And more elevated distress ratios indicate that defaults could continue to increase
Overall corporate fundamentals remained strong in Q1, but higher interest rates are starting to have an impact. Also, earnings growth and corporate margins are lower than the peak levels seen in recent years.
Background on the Schroders Credit Lens:
The Schroders Credit Lens is a comprehensive monthly overview of the global credit market.
It is packed full of data and insights on dollar, euro and sterling investment grade and high yield bonds, and on hard currency, local currency and corporate emerging market debt.
Importantly, as well as assessing each area individually, the Schroders Credit Lens also shows how they compare with each other, in terms of relative attractiveness. This is likely to be of particular interest to those involved in making, or advising on, asset allocation decisions.
The corporate credit section (investment grade and high yield bonds) includes a deep dive into valuations, fundamentals and technicals.
Many investors hedge currency risk when investing in overseas bond markets and hedged yield levels vary significantly depending on your domestic currency. As a result, we have produced three versions of the pack, one each from the perspective of a sterling, dollar and euro based investor.
We hope you find this publication useful and welcome all feedback.
Learn more about investing in Schroders’ Fixed Income Funds.
This document is issued by Schroder Investment Management Australia Limited (ABN 22 000 443 274, AFSL 226473) (Schroders). It is intended solely for wholesale clients (as defined under the Corporations Act 2001 (Cth)) and is not suitable for distribution to retail clients. This document does not contain and should not be taken as containing any financial product advice or financial product recommendations. This document does not take into consideration any recipient’s objectives, financial situation or needs. Before making any decision relating to a Schroders fund, you should obtain and read a copy of the product disclosure statement available at www.schroders.com.au or other relevant disclosure document for that fund and consider the appropriateness of the fund to your objectives, financial situation and needs. You should also refer to the target market determination for the fund at www.schroders.com.au. All investments carry risk, and the repayment of capital and performance in any of the funds named in this document are not guaranteed by Schroders or any company in the Schroders Group. The material contained in this document is not intended to provide, and should not be relied on for accounting, legal or tax advice. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this document. To the maximum extent permitted by law, Schroders, every company in the Schroders plc group, and their respective directors, officers, employees, consultants and agents exclude all liability (however arising) for any direct or indirect loss or damage that may be suffered by the recipient or any other person in connection with this document. Opinions, estimates and projections contained in this document reflect the opinions of the authors as at the date of this document and are subject to change without notice. “Forward-looking” information, such as forecasts or projections, are not guarantees of any future performance and there is no assurance that any forecast or projection will be realised. Past performance is not a reliable indicator of future performance. All references to securities, sectors, regions and/or countries are made for illustrative purposes only and are not to be construed as recommendations to buy, sell or hold. Telephone calls and other electronic communications with Schroders representatives may be recorded.