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Schroders Credit Lens November 2022: your go-to guide to global credit markets

Our monthly analysis highlights the charts and data that matter to investors in corporate credit.

11-09-2022
credit lens

Authors

Kristjan Mee
Strategist, Strategic Research Group

The November edition of the Schroders Credit Lens highlights recent strength of US HY bonds, widening dispersion between HY issuers, and a turning point in corporate fundamentals.

Links to all three versions of the Credit Lens are provided below and at the bottom of the page.

Credit Lens (EUR)

Credit Lens (GBP)

Credit Lens (USD)

For a comprehensive emerging market debt (EMD) presentation, please see Schroders Emerging Markets Lens.

Summary:

Credit spreads have narrowed again, especially in the US. Valuations remain more compelling in European credit

While US HY index spread has narrowed, lowest-rated CCC bonds are underperforming and dispersion between issuers is rising

Rising risk-free yields and wider spreads have resulted in a jump in global credit yields. Even higher rated corporate bonds now offer very attractive yields

Default rates in high yield (HY) have remained surprisingly low. Rising distress ratios indicate that defaults could start to rise in 2023

Issuance is slightly lower in IG compared to 2021, but has fallen drastically in HY, aided by very limited maturities in 2022

The preliminary Q3 corporate fundamentals data indicate that leverage and interest coverage have turned the corner, with the latter rising and the former falling

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.

You can download all three versions of the Credit Lens at the links above.

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The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.

Authors

Kristjan Mee
Strategist, Strategic Research Group

Topics

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