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    Topics@CreditEdge: Navigating Choppy Markets

    Our subject matter experts discuss the use of credit risk measures in evaluating firms to determine tendencies in performance in comparison to their peers in the S&P 500 universe.

    In early October, equity markets suffered their second major correction this year and their worst fall in more than eight months. Rising yields in particular increase the potential for equity volatility.

    Our subject matter experts demonstrate that firms with high credit quality risk and high default risk tend to underperform their peers in the S&P 500 universe on average, especially seen in the tech sector over the last two years. Our experts also show how CreditEdge factor-based strategies have tended to succeed in particular during flattening yield curve environments, with the performance of the low credit quality risk strategy tending to be more insulated to interest rate risk on average.

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    Weekly Market Outlook: Return of Christmas Past Does Not Impend

    More than 20% of the European Union's population is at least 65 years of age. Partly because of an unprecedented aging of the EU's slowly growing population, the average annual rate of economic growth for the EU has slowed from the 2.7% of 2004-2007 to the projected 1.2% of 2019-2020.

    December 2019 Pdf John Lonski, Yukyung ChoiKatrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez
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    Moody's Analytics Webinar: Environmental, Social & Governance and Credit Risk Ideas for Fixed Income Investors

    Fixed income and equity investors face growing pressure to measure and monitor the ESG risk of their portfolios.

    December 2019 WebPage Moody's Analytics, Dr. Samuel W. Malone
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    Weekly Market Outlook: Next Plunge by Profits to Drive Leverage Up to 2009 High

    U.S. business activity has not been exceeding its reach, and that will help extend the long-lived bull market and record-long economic recovery.

    November 2019 Pdf John Lonski, Yukyung ChoiKatrina EllRyan Sweet, Steven Shields
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    Weekly Market Outlook: Equities Advanced for 95% of the Yearly Declines by High-Yield Bond Spread

    The market value of U.S. common stock has been setting new record highs. However, U.S. corporate credit spreads for both bonds and loans have yet to approach their lows of the current business cycle upturn, never mind their existing record lows.

    November 2019 Pdf John Lonski, Yukyung ChoiKatrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields
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    Weekly Market Outlook: Improved Market Sentiment Is Mostly Speculative

    The dreaded inverted yield curve is gone, but perhaps not for long. Following October 30's paring of the federal funds rate's midpoint to 1.625%, the fed funds rate is less than the recent 1.68% 10-year Treasury yield for the first time since May 2019.

    October 2019 Pdf John Lonski, Yukyung ChoiKatrina Ell, Barbara Teixeira Araujo, Michael Ferlez, Ryan Sweet
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    Weekly Market Outlook: Loans Impart an Upward Bias to High-Yield Downgrade per Upgrade Ratio

    The credit rating revisions of loan-only high-yield issuers reveal a higher frequency of rating downgrades compared to issuers with outstanding high-yield bonds.

    October 2019 Pdf John Lonski, Yukyung ChoiKatrina Ell, Barbara Teixeira Araujo, Steven Shields, Ryan SweetMark Zandi
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    Weekly Market Outlook: VIX, EDF and National Activity Index Go Far at Explaining the High-Yield Spread

    There is no one way of statistically explaining the bond yield spreads of high-yield corporate bonds. However, one of the better approaches employs a multi-variable regression model and generates a highly significant adjusted r-square statistic of 0.89.

    October 2019 Pdf John Lonski, Yukyung ChoiKatrina Ell, Michael Ferlez, Ryan Sweet
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    Weekly Market Outlook: Abundant Liquidity Suppresses Defaults

    Nothing quite increases the risk of debt repayment like a drop in the income that funds the servicing of outstanding debt.

    September 2019 Pdf John Lonski, Yukyung ChoiKatrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields
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    Weekly Market Outlook: Cheap Money in Action

    The corporate bond market has proven to be resilient amid recent equity market volatility. Moreover, despite a slew of bearish headlines, the market value of U.S. common stock's latest low of August 14 was still a huge 20.8% above its low of December 24, 2018, while August 2019's month-long average of 19.0 points for the VIX was well under the 25.0 points of December 2018.

    September 2019 Pdf John Lonski, Yukyung ChoiKatrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields
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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 Pdf John Lonski, Yukyung ChoiKatrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields
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