Credit is suffering as global volatility prompts investors to seek safety after years of riding marketwide gains. Here’s four charts showing how the stress is playing out.
The cost of insuring investment-grade debt is set for the biggest annual increase since 2011 in both Europe and the U.S., based on Markit iTraxx indexes of credit-default swaps. Higher costs reflect growing investor wariness as the global economy cools and central banks tighten monetary policy after years of easing.
New bonds have made a dismal start in secondary trading this month in Europe, with only eight of 73 tranches tightening from the launch spread, based on Bloomberg analysis of notes with full pricing information. Performance has flipped from earlier in the year when stronger risk appetite and limited supply bolstered secondary-market performance.
The price gap between junk bonds and investment grade is becoming more pronounced as investors seek safety rather than snapping up riskier debt in search of returns. In the euro market, the gap has widened to the highest in about two years as the European Central Bank prepares to end net asset purchases.
Source: Bloomberg Finance L.P.
Charts: Used with permission from Bloomberg Finance L.P.
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