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    Weekly Market Outlook: Bond Implied Ratings Hint of More Fallen-Angel Downgrades

    On September 9, the senior unsecured bond rating of Ford Motor was lowered from Baa3 to Ba1, where the downgrade constituted a ratings reduction from investment- to speculative-grade (or high-yield). Because investor mandates often prohibit the inclusion of high-yield bonds in investment-grade portfolios, such a downgrade can quickly lower the prices of adversely affected bonds.

    September 2019
    Article
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    Weekly Market Outlook: Leading Credit-Risk Indicator Signals A Rising Default Rate

    The month-long average for the expected default frequency metric of U.S./Canadian high-yield issuers climbed from August 2018's 2.38% and July 2019's 4.16% to 4.59% in August.

    September 2019
    Article
    Graphic of financial indicators

    Weekly Market Outlook: Upon Further Review, Aggregate Financial Metrics Worsen

    The Bureau of Economic Analysis recently lowered its estimates of corporate profits for 2017 and 2018. The downward revision of nonfinancial-corporate profits mostly stemmed from a major upward revision of employee compensation costs and a slight downward revision of nonfinancial-corporate gross value added, where GVA is a proxy for revenues net of non-labor costs.

    August 2019
    Article
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    Weekly Market Outlook: Lowest Investment-Grade Industrial Company Bond Yields since 1956

    The latest rally by Treasury bonds drove Moody's long-term industrial company bond yields down to new 63-year lows. On August 14, the single-A industrial company bond yield closed at 3.30% and the Baa industrial yield ended at 4.08%.

    August 2019
    Article
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    Weekly Market Outlook: Sluggish Business Revenues Pressure Corporate Credit Quality

    It was a tumultuous week. Volatility will lurk until trade issues are resolved. Perhaps the best markets can hope for on the trade front is a long-lived truce.

    August 2019
    Article
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    Weekly Market Outlook: Successful Rate Cuts Are Short and Shallow; Failures Are Deep and Extended

    Since 1984, there have been seven distinct series of Fed rate cuts. Four of the seven rate cut episodes occurred amid a mature business cycle upturn and managed to stave off a recession. They happened in 1985, 1987, 1995, and 1998.

    August 2019
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    Weekly Market Outlook: Faster Loan Growth Would Bode Poorly for Corporate Credit Quality

    Forecasts of a prolonged depreciation of the dollar exchange rate may be overlooking to the increased importance of U.S. spending as a driver of global economic growth.

    July 2019
    Article
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    Weekly Market Outlook: Likelihood of a 1.88% Fed Funds Rate by End of July Soars

    The release of second quarter corporate earnings is moving into full gear and investors are not entirely happy with the results.

    July 2019
    Article
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    Weekly Market Outlook: Market Implied Ratings Differ on the Likely Direction of Baa3 Ratings

    Baa3-grade issuers constitute the bottom rung of the investment-grade ratings ladder. Once a Baa3 rating is subject to a “fallen angel” downgrade to speculative-grade, investors who are mandated to hold only investment-grade obligations must sell the now high-yield debt.

    July 2019
    Article
    illuminated charts and graphs

    Weekly Market Outlook-Below-Trend Spreads Bank on Profits Growth, Lower Rates and Healthy Equities

    Sequential declines by the Bureau of Economic Analysis' quarterly estimate of nonfinancial-corporate profits from current production, or core pretax profits, often reveal little about the current or future states of the business and credit cycles.

    June 2019
    Article
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    Weekly Market Outlook: Global Collapse by Bond Yields Stems From Worldwide Slowdown

    Both the corporate bond and equity markets responded positively to the latest drop by Treasury bond yields and the likelihood of at least two reductions of the federal funds rate during the remainder of 2019.

    June 2019
    Article
    illuminated charts and graphs

    Weekly Market Outlook: Borrowing Restraint Likely Despite Lower Interest Rates

    According to the Federal Reserve's “Financial Accounts of the United States”, first-quarter 2019's outstanding debt of U.S. nonfinancial corporations advanced by 8.1% year-over-year to a new record high of $9.926 trillion.

    June 2019