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Weekly Market Summary
May 20 to May 24, 2024
Extra Credit*
- Primary investment grade corporate markets have been extremely active on both sides of the Atlantic this year with U.S. dollar investment grade corporate issuance up 33% year-over-year at $715 billion and EUR/GBP investment grade corporate issuance up 20% at €341 billion. An important element of the rise in EUR/GBP issuance has been the rise of Reverse Yankee issuance (US companies issuing in non-USD currencies) where volumes have picked up 2.5x year-over-year to $55 billion.
- Yankee issuance (non-US companies issuing in USD) is up by $47 billion to $186 billion (35%) which is in line with the overall surge in U.S. dollar supply for 2024. The much larger rise of Reverse Yankee issuance compared to Yankee issuance has been driven by two factors: EUR spreads have become relatively cheaper for issuers YTD with the EUR market tighter by 28 basis points versus U.S. dollar investment grade tighter by 12 basis points YTD. This leaves this current spread difference of 23 basis points at the tight end of its 2-year range (14-71 basis points).
- Bloomberg updated their returns forecast for high yield bond and bank loans recently, as their new return expectations for high yield bonds and bank loans has landed them at 5.0-5.5% total return for high yield bonds and 8.5-9.0% for loans.
- In the first quarter of 2024, sustainable open-end and exchange-traded funds rebounded slightly by attracting almost $900 million of net new money, compared with small, restated outflows of $88 million in 4Q23. European sustainable funds registered almost $11 billion of inflows, more than double the subscriptions of the previous quarter. While across the pond, U.S. sustainable funds/ETFs experienced its worst-ever quarter with record redemptions of $8.8 billion. Inflows in the rest of the world were subdued, while Japanese sustainable funds recorded outflows of $1.7 billion.
- Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month at 1.32% and 1.55%, respectively, compared to 1.86% and 1.67% from March. The long-term historical default rate for loans and high yield bonds was 3.0% and 3.4%, respectively.
Sources: Bloomberg and JP Morgan as of 5/20/24.
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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