Schroders Credit Lens December 2022: your go-to guide to global credit markets
Our monthly analysis highlights the charts and data that matter to investors in corporate credit.
Autheurs
The December edition of the Schroders Credit Lens highlights how credit spreads have continued to inch lower, the limited new issuance in the high yield (HY) market, and some small but significant changes in corporate fundamentals.
Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
Summary:
Credit spreads have continued to inch lower, now standing at, or even slightly below, summer lows. 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 still wide
Default rates in high yield have started to rise. Rising distress ratios indicate that defaults could start to increase in 2023
Issuance is slightly lower in investment grade compared to 2021 but has fallen drastically in HY. Very limited maturities in the near term have reduced the need for issuance
Q3 corporate fundamentals data indicate that leverage has remained stable, aided by very low debt growth. Interest coverage, on the other hand, has started to move lower on rising interest costs
Looking ahead, unless earnings fall meaningfully, leverage is unlikely to increase sharply. Still, rising interest costs and pressure on margins from higher costs are likely to continue to erode fundamentals
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.
Autheurs
Topics