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US corporate valuations and the link with bond yields


The essential

US credit markets have delivered a strong performance since mid-February 2016: for example, HY spreads tightened massively, on average from a peak close to 900 b.p. to a low of 355 b.p. one year later, while now spreads.

After such a rally, our note addresses the state of the art of US credit valuations under different angles: current spreads are not fully discounting the buoyant optimism shown by business confidence, but at the same time they do not seem to offer significant further upside versus their usual drivers. In a nutshell, we re-run our regressions to estimate fair value spreads paid by US corporate bonds and present the results from the models and how to interpret them in the post-GFC “low yield regime”. As the default cycle has just turned for the better, we also address the link between speculative grade valuations and short-term/long-term default cycle.

CROSS ASSET (Download)


April 2017


Avril 2017


The Article


BERTONCINI Sergio , Senior Fixed Income Research Strategist
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US corporate valuations and the link with bond yields
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