Schroders Credit Lens March 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 March edition of the Schroders Credit Lens highlights the spread pick-up of Euro over USD credit seen over the past few years has mostly disappeared, with Euro spreads having narrowed in recent weeks and USD having widened slightly from extremely tight levels.
Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
Summary:
- The spread pick-up of Euro over USD credit seen over the past few years has mostly disappeared, with Euro spreads having narrowed in recent weeks and USD having widened slightly from extremely tight levels. [Slide 5]
- USD spreads are very tight, but alongside rising economic uncertainty, investment-grade (IG) widened to levels last seen in October, and high-yield (HY) to their widest since the start of the year [Slide 4]
- YTD gross new issuance levels are roughly similar to recent years. Over the past year, the USD HY maturity wall has been gradually pushed out, while distress ratio and default rate have fallen to well below their long-run median [Slides 54,55,59]
- The credit rating migration picture is mixed. Within USD HY, weaker rated issuers (CCC) have seen downward rating migrations, whereas stronger rated issuers (BB) have seen upward. The trend in recent years of ‘Rising stars’ (upgrades to IG) outpacing ‘fallen angels’ (downgrades to HY) has faded, with the two now broadly balanced [Slides 57-58]
- Overall corporate fundamentals were generally stable in Q4, with improvements in some areas [Slides 34-52]:
- Having trended upwards in recent years, IG leverage edged down in Q4 helped by stronger earnings growth. HY leverage remained stable. IG leverage remains relatively more elevated than HY when compared to their respective histories
- Having fallen significantly over the past two years, interest coverage ratios (ICRs) picked up in Q4, with interest expense growth having slowed in recent quarters
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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.
You can download all three versions of the Credit Lens below:
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