21st July 2020
“Following the Fed’s announcements of direct corporate bond and ETF purchases (high yield and investment grade), credit spreads have contracted sharply – over 500bps in the high yield space. With spreads now closer to their long-term average, and significant economic uncertainty remaining, we would posit that the scope for spread tightening is more challenging despite the Fed continuing to “underwrite” the market. We explore below some insights from the recent spate of corporate issuance with particular reference to the emerging risks for high yield investors.”
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