Since the Asia crisis, most countries in Asia have displayed a longer term secular trend of falling default risk.
In the last twelve months, however, we have seen a significant uptick in equity market volatility in both the US and China, the world’s two largest economies by GDP. Rising credit risk is also apparent from these and other developments in both countries. A key question for investors is whether firms with lower levels of credit risk are likely to outperform during the next turn in the credit cycle.
In this 1-hour webinar, our experts present research showing that firms with high credit quality risk and high default risk have tended, on average, to systematically underperform their peers in multiple equity and bond markets spanning the US and Asia. We discuss the impact of shifting yield curves on CreditEdge factor-based strategies as well, and highlight the role of credit risk signals for early warning at the sector level.
- Sam Malone, Director of CreditEdge Research
- Yuki Choi, Associate Director
Questions? Email: MA-Webinars@moodys.com
High-yield corporate bond issuance had a strong start to the year, due to growing expectations for the U.S. economy to take off coupled with tight credit spreads and less perceived credit risk.
The secular decline by Treasury bond yields since 1982 has been accompanied by a secular climb in the ratio of private and public nonfinancial-sector debt to GDP.
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.
This paper gives an overview of the Moody's Analytics model of bonds' Fair Value Spread and Alpha Factor.
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.
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%.