Alternative Credit Letter

The “Alpinum – Alternative Credit Letter” provides a quick and concise overview of the credit and fixed income markets. Charts with long data series enable the reader to put the prevailing market environment better into historical context. 

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Credit yields trump earnings yield on equities

Yields on leveraged loans are currently reaching 10% and remain materially higher than yields on equities. Since 2022 the loan investors have been benefiting from rising rates, which translated into increasing income via quarterly benchmark

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Is inflation about to peak?

Since the beginning of 2021, breakeven inflation has risen sharply, and has reached almost 3% at the end of October, leading to a breakout in short term nominal yields and a bear flattening of the

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BB CLOs 7.4% vs US HY bonds 3.0%

CLOs have always offered an attractive premium to bond or loan spreads, but investors continue to overlook the asset class due to their complexity and as they tend to be less liquid during market stress

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Interest rate volatility calmed down

The steepening of the US Treasury bond yield curve increased the volatility of interest rates overall. This is well illustrated by the MOVE index, an indicator that measures interest rate volatility using the implied volatility

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Rating downgrade cycle has stopped

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.

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Duration heavy IG bonds tanked

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

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Credit spreads almost at pre-Covid levels

During the market rally in November, credit spreads have further tightened and reached almost pre-Covid levels in the investment-grade category, whereas spread levels are still wider in the high-yield market. OAS of broad US investment-grade

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Rating downgrade slowed down

Year-to-date US high yield corporate rating downgrades accumulated to more than 475 – even surpassing the previous crisis in 2008. The up-/downgrade ratio (proportion of upgrades among total rating actions of Moody’s and S&P) marked

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