Jenna Barnard, Co-Head of Strategic Fixed Income, remarks on the significant rally in credit markets over the last week, with healthy investment grade issuance volumes and even the US high yield market open for new issues. Support from the authorities trying to help companies avoid default has accelerated the sharp market recovery.

 Key takeaways:

  • Following two to three weeks of strength in credit markets in which we have found it hard to source bonds to purchase, last week saw a further significant rally in all forms of credit. While companies have been focused on liquidity, and equity holders demanded they improve balance sheets, governments and central banks were also signalling strongly that they want to minimise corporate defaults.
  • The most significant action came from the US Federal Reserve (Fed) on Thursday 9 April, given the sheer size of the corporate bond purchase programme and the extension of eligibility to recent and prospective fallen angels in the high yield market.
  • We remain positive on corporate bonds: when we emerge from this crisis, we will be in a very low interest rate environment throughout the developed world and there will be a need for income.

 

Note: this video was recorded on 15 April 2020