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Weekly Market Summary
Jun 19 to Jun 23, 2023
Extra Credit*
- U.S. life insurance providers continue to add exposure to corporate bonds, as cash and invested assets stood at $5.3 trillion at the end of 2022, up by $151 billion or 3% from $5.2 trillion in 2021. Total insurance corporate holdings have grown by approximately 54% from 2011 to 2022 and stand currently at $2.2 trillion, as total corporate holdings by insurance companies grew by $67 billion or 3% year-over-year to $2.2 trillion. This includes investment-grade and high-yield corporate bonds.
- 58% percent of the $1.69 trillion institutional loan market is now tied to SOFR. Lower-rated loans have been slow to transition to SOFR, compared with 64% of BB and 60% of B rated loans. As of June 16, 2023, 1,164 loans totaling $707 billion remain benchmarked to Libor, comprised of 18% rated BB or higher, 55% single-B rated,16% triple C-rated, and 11% unrated.
- Recent forecasts by the Federal Reserve and European Central Bank (ECB) have ben hawkish. Expectations are for the Fed to deliver two more hikes and a pause by the ECB after July. Expectations for the Bank of England call for hiking rates to 5.5% and for the Bank of Japan to exit yield-curve control in July.
- The trailing 12-month default rates for high-yield bonds and bank loans, excluding distressed exchanges, finished the month at 2.41% and 1.49%, respectively, up from 2.37% and 1.42% from April.
Sources: Bloomberg and JP Morgan as of 6/21/23.
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.
Past performance does not guarantee future results. Index performance is not indicative of fund performance. Indexes are unmanaged and it is not possible to invest directly in an index.
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