Corporate Spreads and Default Rates are Telling Different Stories

Fixed Income Chart of the Month: July 2023

We are currently seeing mixed messages in the credit market between corporate credit spreads and issuer default rates. From a year ago, credit spreads have moved tighter due to improving fundamentals, while default rates have increased. Default rates and corporate spreads have historically tracked one another, so given the current divergence, it indicates an eventual decline in default rates or widening of corporate credit spreads.

An Eventual Decline in Default Rates or Widening of Corporate Credit Spreads Could Occur Given the Current Divergence

Corporate Spreads vs. Defaults

Source: Bloomberg, BofA Global Research as of 6/30/2023.
  • The investment grade corporate market represents roughly 84% of the index1, while the high yield corporate credit market represents 16%.
  • Credit spreads tightened 62 basis points (bps) from a year ago, from 229 bps to 167 bps.
  • Over the same period, default rates increased to 3.21% from 0.89%.

Learn more about SBH’s Fixed Income Strategies.

How Can We Help You?

"*" indicates required fields

Name*
This field is for validation purposes and should be left unchanged.

How Can We Help You?

"*" indicates required fields

Name*
This field is for validation purposes and should be left unchanged.

You are now leaving the SBH main website and entering the SBH Mutual Funds portion. Please note that the SBH main website window will remain open.

How Can We Help You?

We’d love to hear from you and answer any questions you may have about Segall Bryant & Hamill.  You can reach us by submitting this form, by calling (800) 836-4265, or by emailing us at [email protected]. We look forward to hearing from you.

"*" indicates required fields

Name*
What type of investor are you?*
This field is for validation purposes and should be left unchanged.

You are now leaving the SBH main website and entering the SBH Mutual Funds portion. Please note that the SBH main website window will remain open.