Schroders Credit Lens January 2025: 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 January edition of the Schroders Credit Lens highlights how USD spreads have been at very tight levels in recent months, although USD HY widened slightly in December.
Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
Summary
- USD spreads have been at very tight levels in recent months, although USD HY widened slightly in December. In contrast both Euro IG and HY narrowed over the month, albeit remain relatively less compressed than USD. [Slide 4]
- Yields on USD HY and Euro HY remain notably lower than levels seen during 2022/23. USD IG and GBP IG yields are at similar levels to a year ago despite spreads having tightened [Slides 5]
- With central banks cutting rates and yield curves steepening, IG corporate bond yields have moved back above cash rates, having been around or below for much of 2024 [Slide 6]
- 2024 gross issuance was higher than the previous two years, particularly in US HY, with the maturity wall having been gradually pushed out. USD HY bond default rates fell during 2024 and are below long-run median levels [Slides 51 and 56]
- The credit rating migration picture is mixed. Within HY, weaker rated issuers (CCC) have seen downward rating migrations, whereas stronger rated issuers (BB) have seen upward. And ‘rising stars’ have been outpacing ‘fallen angels’, with stronger HY issuers being upgraded to IG at a faster rate than weaker IG issuers are being downgraded to HY [Slides 54-55]
- Overall corporate fundamentals were broadly stable in Q3, despite marginal weakening in some areas:
Chart of the month
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 below:
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