Schroders Credit Lens September 2024: 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 September edition of the Schroders Credit Lens highlights how spreads quickly retraced the sharp widening seen during the early August market volatility. USD investment-grade (IG) and high-yield (HY) spreads are tight relative to history, and tighter than Euro spreads
Links to all three versions of the Credit Lens are provided below and at the bottom of the page.
Summary:
- Spreads quickly retraced the sharp widening seen during the early August market volatility. USD investment-grade (IG) and high-yield (HY) spreads are tight relative to history, and tighter than Euro spreads [Slide 4 and 5]
- Alongside recent falls in government yields, corporate bond yields have touched their lowest levels in around two years [Slide 7]
- Despite the brief rise in market volatility, August issuance was in line with recent months. And year-to-date issuance is ahead of recent years, particularly in US HY, with the maturity wall gradually being pushed out. [Slides 6 and 55]
- 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 58-59]
- US HY bond default rates have edged down in recent months and are now slightly below the long-run median levels [Slide 55]
- Overall corporate fundamentals were mostly stable in Q2, despite marginal weakening in some areas. Leverage has been mostly stable in recent quarters, albeit with a slight upwards trend in IG over the past couple of years. In recent quarters median Interest Coverage Ratios (ICRs) have fallen, with greater declines in IG markets so far [Slides 36-53]
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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