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During 2020, 45% (USD 521 bn) of the loan market by par amount had received a rating downgrade from a total market size of USD 1.2 tn. However, the flood of corporate downgrades has ebbed down and has even started to reverse. As of Q1 2021, the number of upgrades in the S&P/LSTA Leveraged Loan
Loan Rating upgrades & downgrades Read More »
Year-over-year, the Barclays Global Corporate Investment Grade Bond index (Global Corp IG) has returned +8.3% (duration 7.2 / yield-to-worst 1.7%). The Sherman ratio is an interest rate risk measure and represents the yield per unit of duration. In other words, a Sherman ratio of 1 means that it would take a 100bps rise in interest
Sherman ratio -interest risk measure Read More »
Income returns have decreased by almost 70% for European investment grade bonds and by around 50% for European high yield bonds over 2007 to 2020. European loans, however, have been much less affected as the asset class is not part of the European Central Bank’s quantitative easing programmes. European loans are at an advantage as
Income Returns have descreased Read More »
In 2020, the rating agencies acted as quickly as never before in downgrading the issuer ratings due to the COVID-19 pandemic – very different to 2007/08, when rating agencies were criticized for acting too slowly. During 2020, 45% (USD 521 bn) of the loan market by par amount had received a rating downgrade from a
Rating downgrade cycle has stopped Read More »
In anticipation of a strong economic recovery ahead of us, long term interest rates have spiked from their historical lowest levels This has paid its toll For example, US investment grade bonds suffered a performance of ~4.5% on a YTD basis as these bonds are highly interest rate sensitive with an average duration risk of
Duration heavy IG bonds tanked Read More »
Long-term interest rates have spiked from historical low levels in anticipation of a strong recovery. With the US ISM Services PMI surging to an all-time high of 63.7 points (previous month 55.3), US long-term interest rates may continue to trend higher. As a consequence of the recent rise in interest rates, US investment grade bonds
Long-term interest rates have spiked Read More »
Chinese producer price inflation (PPI) accelerated from 0.3% year-over-year (yoy) in January 2021 to 1.7% yoy in February 2021. For March, an advance PPI inflation tracker points to an increase of 5% yoy. Global price pressures are building due to the yoy base effect, pent-up demand and on the back of supply chain disruptions. This
40ft container Shanghai to New York Read More »
US treasury yields have risen from 0.8% end of 2020 to currently 1.7% and bond investors have suffered painful losses on their long-duration bonds (up to -5% ytd). Senior secured loans are valued with a fixed credit risk premium combined with the money market rate. They are so-called “floaters” and tend to gain in value
US treasury yields have risen Read More »
Global reflation continues and inflationary pressures are building. From semiconductor chips to copper, demand is on the rise while capacity remains constrained. While Western governments have largely maintained consumer income, investments into production capacity is lagging to absorb the recovered spending capacity. Markets have recognized this to some extent and inflation rates are on the
Since December 2020, 10yr US Treasury yields rose 60 bps, while expected inflation remained flat at ~2.2%. Inflation (i.e. measured by “PCE” = Price Consumer Expenditures) will likely pick up significantly from current levels of ~1.4% over the next quarter because of the year-over-year base effect and cyclical market forces. The US Fed announced that
10yr US Treasury yields rose 60 bps Read More »
