Schroders Credit Lens March 2024: your go-to guide to global credit markets
Our monthly analysis highlights the charts and data that matter to investors in corporate credit.
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The March edition of the Schroders Credit Lens highlights that year-to-date issuance has been strong, particularly in IG. Within USD HY, issuance has been dominated by refinancings, with maturity walls gradually being pushed out
Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
*We also now publish a separate EUR version specifically for Insurance Company Investors.
Summary:
Spreads have narrowed significantly in recent months, alongside growing expectations for both lower policy rates and a soft landing for economic growth. USD spreads are tighter relative to their history than is the case for EUR spreads, particularly so for IG
Corporate bond yields have fallen far from their October 2023 peaks, and are now notably lower than the levels seen for most of last year
Alongside relatively lower yields, year-to-date issuance has been strong, particularly in IG. Within USD HY, issuance has been dominated by refinancings, with maturity walls gradually being pushed out
The credit rating migration picture is mixed. In HY, net downgrades have been outpacing upgrades over the last year. By contrast, ‘rising stars’ have been outpacing ‘fallen angels’, with stronger HY issuers being upgraded to IG at a faster rate than weaker IG issuers are downgraded to HY
While US high-yield default rates have moved higher over the past year, they have so far only increased to around long-run average (median) levels. As is the case for Euro high-yield default rates
Overall corporate fundamentals were broadly stable in Q4. In recent quarters interest coverage ratios have fallen to more typical levels on the back of higher interest expense. Leverage mostly remained in recent ranges.
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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.
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