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Weekly Market Summary
Feb. 20 to Feb. 24, 2023
Extra Credit*
- If you wanted to extend duration in investment grade corporate bonds, the tradeoff regarding the ratio of yield/duration moved from 2.92 for short term investment grade corporate bonds to 0.43 for long term investment grade corporate bonds.
- Asset backed (ABS) was another sector of fixed income that offered attractive yield levels with limited duration risk, as ABS yielded 5.23% with a duration of 2.83 years vs. 1–5-year U.S. treasuries at 4.57% and 2.66 years of duration.
- Several loan issuers launched refinancings this week that benefitted from rating upgrades. The bulk of the refinancing issuance to start the year has been from single-B rated name, as roughly 71% of the refi supply so far. BB issuers have made up 21.5%, while those with ratings split between the single-B and BB tiers have accounted for 7.7%.
- The trailing 12-month default rate for high yield bonds and bank loans finished 2022 at 1.83% and 1.82%, well below their long-term average of 3.2% and 3.1%.
Sources: Bloomberg and Morningstar LCD. Data as of 2/22/23.
Previous reports
*Source: Morningstar®, Bloomberg, Credit Suisse. OAS is Options Adjusted Spread. 4-year discount margin is used for spread for bank loans. Yield quoted is yield-to-worst or equivalent calculation. YTD Low / High for yields are based on end of week and not intraday movements. Indexes and sub-indexes: Investment-grade corporates represented by Bloomberg US Corporate Bond Index. High-yield bonds represented by Bloomberg US Corporate High Yield Index. Bank loans represented by Credit Suisse Leverage Loan Index. The red and green arrows depicted under Yields, Option Adjusted Spreads, and Prices indicate a higher or lower value from the previous week.
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