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Weekly Market Summary
Oct 14 to Oct 18, 2024
Extra Credit*
- The S&P put Boeing on a negative credit watch, which—at BBB- and also on Moody’s negative watch—leaves the company on the doorstep of dropping to the high-yield market. Fitch has rated the company BBB- outlook negative, and two of the three rating agencies would have to downgrade for the company to qualify for high-yield indices. If Boeing does get downgraded, total bonds outstanding of $57 billion would make it the largest fallen angel on record.
- The biggest fallen angels over the past decade are Ford ($52 billion), Occidental Petroleum ($32 billion), and Kraft ($23 billion). From an index perspective, $52.5 billion of index-eligible debt would be added to the JPMorgan High Yield Bond Index and would represent a 3.6% weighting in the index, the largest issuer in the index by 2x; Charter and Transdigm would be the second and third largest issuers at 1.8% and 1.1%, respectively.
- Boeing would also become the largest issuer in the industrials sector and would account for 41% of the sector (Transdigm would be the second largest at 13%). Industrials would also become the third largest sector in JPMorgan High Yield Bond index at 8.7% behind energy (11.4%) and financial (9.0%). And on a rating basis, BB market weight would rise from 50% today to 52%, and Boeing would account for 7% of the BB universe.
- Boeing is a relatively small investment-grade issuer: It is the 21st largest issuer in the Bloomberg Index at 0.7%. While this may turn out to be the largest fallen angel yet, it would not be close to it on a percentage basis. When Ford and General Motors were downgraded in 2005, they were 8.3% and 3.0% of the investment-grade market, respectively.
- Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished the month both at 1.18% for high-yield bonds and 0.98% for bank loans, down and up from 1.40% and 1.16% in the month prior. 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 10/14/24.
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.
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