Fallen Angel risk results from the possibility and price impact of bond downgrades from investment grade (IG) into high yield (HY).
In this webinar, Moody’s Analytics researchers Samuel Malone, Ph.D. and Yukyung Choi present evidence on the early warning power of the CreditEdge Deterioration Probability metric for predicting Fallen Angel downgrades.
They find that Deterioration Probability quintile portfolios exhibit monotonically increasing rates of Fallen Angel downgrade frequencies, and that historical under performance by high Deterioration Probability versus low Deterioration Probability bond portfolios is exacerbated during market downturns. These findings should be of interest to fixed income investors, as the price deterioration experienced by bonds in the year prior to a Fallen Angel downgrade event is significantly greater than the price deterioration experienced by bonds of future IG downgrades on average.
High yield bond issuance and newly rated loans from high-yield issuers have soared thus far in 2021.
Monetary and fiscal stimuli seem to be surfacing here, there, and everywhere.
Weekly Market Outlook: Real GDP Growth's Biggest Improvement since 1950 May Power 2021's Profits Growth
Each noteworthy deterioration of U.S. corporate credit quality since 1982 was accompanied by a significant contraction of yearlong core pretax profits, where the latter is supplied by the National Income Product Accounts of the U.S.
Both the average expected default frequency metric of U.S./Canadian issuers and first-quarter 2021's credit rating revisions of U.S. high-yield issuers favor a renewed narrowing of the high-yield bond spread.
This paper gives an overview of the Moody's Analytics model of bonds' Fair Value Spread and Alpha Factor.
Weekly Market Outlook: Stocks and High-Yield Performed Well Amid Prior Upturns by Treasury Bond Yields
How did financial markets fare during the four previous distinct upturns by Treasury bond yields since December 2008's Great Recession bottom for the 10-year Treasury yield?
Following the recessions of 1990-1991, 2001, and 2008-2009, the U.S. high-yield default rate peaked at June 1991's 12.3%, January 2002's 11.1%, and November 2009's 14.7%.
Markets now fret over the possibility that massive amounts of fiscal and monetary stimulus may damage future financial conditions and economic performance.
Moody's Analytics' average expected default frequency metric of U.S./Canadian high-yield issuers, or high-yield EDF, recently sank to 2.36% for its lowest reading since the 2.35% of early October 2018.
Industrial commodity prices have climbed higher in response to both an actual and anticipated firming of global industrial activity.