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Weekly Market Summary
Jan 6 to Jan 10, 2025
Extra Credit*
- The rating agencies continue to look favorably at investment-grade corporate bonds, which had a third consecutive year of over $600 billion of debt upgraded and under $200 billion of debt downgraded. The amount of debt downgraded in 2024 was the least since 2007, despite the market being 4.4x larger. The upgrade/downgrade ratio of 4.7x in 2024 was a record as well. The share of BBB- debt has fallen under 10% for the first time since 2012.
- In percentage terms, 8.4% of investment-grade corporate bonds were upgraded, of which 8.1% occurred within investment grade and 0.3% were rising stars. On the other hand, just $133 billion of investment-grade corporate bonds were downgraded (the lowest tally since at least 2007), of which $129 billion (97%) stayed in investment grade and just $4 billion fell to non-investment grade.
- Both rising stars and fallen angels’ activity fell significantly in 2024. There were $22 billion of rising stars, 5.3x more than the $4 billion of fallen angels.
- Upgrades from BBB to A exceeded downgrades by $73 billion in 2024 ($137 billion upgrades from BBB to A while $64 billion of downgrades from A to BBB). Furthermore, about half the downgrades this year occurred within the A rated or higher. As such, the share of BBB debt fell further to 46.1%, the lowest in nine years and 5% off the peak in 2018 (51%). The share of BBB- debt has fallen under 10% for the first time since 2012. On the other hand, the share of A rated debt (44.7%) improved to its highest since 2011.
- Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished December at 1.52% for high-yield bonds and 0.36% for bank loans, down and up from 1.54% and 0.34% in the month of November. This is also well below the long-term historical default rate of 3% for loans and 3.4% for high yield, and the historical post-GFC default rates of 2.3% and 2.5%, respectively.
Sources: Bloomberg and JP Morgan as of 1/7/25.
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.
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