IN FOCUS6-8 min read

Schroders Credit Lens September 2023: your go-to guide to global credit markets

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

09-08-2023
credit-lens2

Authors

Harry Goodacre
Strategist, Strategic Research Unit

The September edition of the Schroders Credit Lens highlights that spreads increased marginally in August, alongside the sell-off in equity markets, although US dollar spreads continued to hover around their 2023 lows.

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: 

Corporate bond yields were little changed on the month, now having been at elevated levels for almost a year. Spreads increased marginally in August, alongside the sell-off in equity markets, although US dollar spreads continued to hover around their 2023 lows.

The credit rating migration picture is mixed. Within high yield (HY), net downgrades have been outpacing upgrades over the last year. But ‘rising stars’ have been outpacing ‘fallen angels’, with stronger HY issuers being upgraded to investment grade (IG) at a faster rate than weaker IG issuers are downgraded to HY.

US high-yield default rates have been on an upward trend over the past year, albeit they ticked down in August. In contrast, euro high-yield default rate edged up this month from low levels. Elevated distress ratios in both markets indicate that defaults could continue to increase

US high-yield issuance is still subdued, with very little issuance from highest risk borrowers rated CCC. But refinancing requirements for US high-yield are elevated when looking beyond the next year.

Overall corporate fundamentals weakened slightly in Q2, with higher interest rates starting to have an impact. Earnings growth continued to slow but leverage remained broadly stable.

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.

Subscribe to our Insights

Visit our preference center, where you can choose which Schroders Insights you would like to receive

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

Harry Goodacre
Strategist, Strategic Research Unit

Topics

Please consider a fund's investment objectives, risks, charges and expenses carefully before investing. The Schroder mutual funds (the “Funds”) are distributed by The Hartford Funds, a member of FINRA. To obtain product risk and other information on any Schroders Fund, please click the following link. Read the prospectus carefully before investing. To obtain any further information call your financial advisor or call The Hartford Funds at 1-800-456-7526 for Individual Investors.  The Hartford Funds is not an affiliate of Schroders plc.

Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada.  Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada.  SFA markets certain investment vehicles for which other Schroders entities are investment advisers.

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security/sector/country.

Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit www.schroderscapital.com

SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.