The credit market continues to suffer, as global instability forces investors to seek shelter after years of "easy profits." Below, we will look at two graphs illustrating how financial markets are experiencing stress.
The cost of investment grade debt insurance registered the largest annual increase since 2011. in Europe and the United States, based on the Markit and iTraxx CDS indexes. Higher costs reflect growing investor prudence as the global economy is slowing down and central banks tighten monetary policy after years of relief.
The difference in price between the Junk bond and the investment asset class is becoming more pronounced, as investors are looking for more security than the need to cope with risky debt in return for returns. On the European market, the gap has risen to the highest in about two years, as the European Central Bank is preparing to end quantitative easing.
Source: Bloomberg Finance L.P.
Charts: Used with permission of Bloomberg Finance L.P.
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