Schroders Credit Lens April 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 April edition of the Schroders Credit Lens highlights how spreads across major markets have widened sharply in reaction to tariff news, with the largest weekly increase in USD HY spreads since the Covid pandemic onset.
Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
Summary:
- Spreads across major markets have widened sharply in reaction to tariff news, with the largest weekly increase in USD HY spreads since the Covid pandemic onset. Spreads have widened across all ratings and are no longer very tight relative to history [Slide 4-6]
- All USD sectors have seen spreads widen since February; with Autos, Transportation, and IG Leisure some of the more notable increases [Slide 7]
- Major corporate bond indices are diversified across sectors, although Financials are a significant proportion of IG. Euro HY has high exposure to auto sector which has been a focus of tariff uncertainty [Slide 8]
- March YTD USD gross new issuance levels roughly similar to recent years. Over the past year, the USD HY maturity wall has been gradually pushed out, while USD HY default rate has fallen to relatively low level. However, USD HY distress ratio has ticked up in March given the spread widening [Slides 55,56,60]
- 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 58-59]
- In HY markets, secured bonds have grown as a proportion of the market in recent years. Secured bonds have typically had higher recovery rates than unsecured, but time will tell whether this continues for the current larger cohort [Slides 9-10]
- Overall corporate fundamentals were generally stable in Q4, with improvements in some areas [Slides 35-53]
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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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