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Weekly Market Summary
Nov 6 to Nov 10, 2023
Extra Credit*
- Earnings season is nearly complete for investment-grade companies, and this has translated into a ratings trend where upgrades this year continue to occur at a 4:1 pace versus downgrades.
- The largest rising star ever was born last week with Ford’s $41 billion of debt moving from the high-yield to the investment-grade index. Moreover, the proportion of BBB- debt in the investment-grade market is now at an 11-year low at just 11%, implying there may be significant downside cushion from a ratings perspective should the economy finally starts to meaningfully slow.
- Bloomberg recently forecast $1.22 trillion of gross fixed-rate corporate issuance in 2024 (+$75 billion/+6% year-over-year). This translates into $475 billion of net supply (-$55 billion/-10% year-over-year). The key structural difference between 2023 and 2024 is the $130-billion jump in maturities. This change, the largest ever, is a direct consequence of the outsized 2020-21 COVID supply.
- Bank-loan (represented by Morningstar LSTA Leverage Loan) and high-yield bond (represented by Bloomberg Corporate High Yield Index) default rates, excluding distressed exchanges, finished the month at 1.89% and 1.76%, respectively, down and up from 1.90% and 1.32% from September. The long-term historical default rate for loans and high yield bonds is 3.1% and 3.2%, respectively.
Sources: Bloomberg and JP Morgan as of 11/6/23.
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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