In March 2022, the USD swap curve inverted, and by the end of August, the spread between the two- and ten-year maturities fell to -0.6% (see also the Alternative Credit Letter of April), suggesting imminent
The peak Fed funds rate is currently priced in at a level of 3.4% (down from >4% in mid-June) for February 2023. However, the shape of the curve is of even greater importance. The inverse
The Bloomberg Global Agg. Bond index, which is composed of corporate and government bonds, experienced with a decline of -11.6% year-to-date by far the worst performance on record! The chart below shows the individual calendar
The markets are anything but calm at the moment, and this applies to all asset classes. We are feeling comfortable in this environment right now, as our absolute return philosophy and draw down risk management
Yields of US short term low grade bonds broke through the 10-years average of 5.7% and reached a level slightly above 7% in early May. The yield curve steepening by more than 200 bps over
In macro-finance, it is well known that an inverted yield curve is signalling a recession or at the very minimum, it is indicating that the economy is operating in a late cycle. For example, the
An interest rate swap is an agreement between two parties to exchange fixed and floating interest payments with each other over a specified period of time. At the time of the swap agreement, the total
Within a matter of only two weeks, European High Yield spreads have jumped to a spread level of 480 bps, well above the last 5 years average of 366 bps and back at August 2020
Looking back at the last rate hike cycle (2015-2018), credit spreads for both high yield and investment grade bonds (see blue line) were not immediately negatively affected when the Fed rates started to take off.
Since the beginning of 2021, breakeven inflation has risen sharply, and has reached almost 3% at the end of October, while breakeven inflation has been relatively steady at Investors have somehow learnt to deal with
Leveraged loans continued to perform well during the recent risk-off mode and upmove in interest rates, while US high yield bonds were negatively affected. The floating rate feature in leveraged loans offers a clear advantage
Central banks unprecedented influence on capital markets and their coordination with central governments will put a backstop on the economy in the US and Europe. Rating agencies have started to revise downwards their projections for
According to FactSet, 44% of S&P 500 stocks yield again more than 10yr US Treasury bonds at 2.14%. Investors have little choice to go elsewhere and stocks should find marginal buyers again.