There remain many challenges ahead for credit markets
On the surface, fixed income markets has been pretty quiet but, below the surface, the currents have been violent.
Although many of us were focussed on the possibility of this, it has caught market participants off guard, particularly those for whom rates have been a permanent source of income: consistent, solid, one way and always positive.
Investment grade corporate credit spreads have barely moved over the quarter either in Europe or in the US. Yet, the asset class has had one of its most negative, and most volatile, quarters ever. The US Investment Grade Corporate Credit index lost 4.5% in the first quarter of 2021, making it the worst quarterly performance since the global financial crisis. High yield markets fared no better with a loss of 0.08% for global high yield. In this publication, we focus almost exclusively on what’s happening in credit land.