Fixed Income
Chart of the Month:
July 2023

Corporate Spreads and Default Rates are Telling Different Stories

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.

Archive

6/23: Bank Failures Put Additional Pressure on Mortgage-Backed Securities

4/23: What Does Interest Rate Volatility Mean for Bond Investors?

3/23: “Dude, Where’s My Yield?”

2/23: The Rise of Passive Bond Investments

1/23: End of a (Negative) Era: Negative Yields Reach Positive Territory Globally

12/22: Will the Upcoming Fed Interest Rates Projections Match the Current Market Expectations?

11/22: The “Sweet Spot” for Liability-Driven Investing (LDI)

10/22: The Credit Risk You May Not Realize You’re Taking

9/22: How Higher Yields Can Protect Fixed Income Investments

1The index is a market value weighted blend of the Bloomberg U.S. Corporate Investment Grade Index and the Bloomberg U.S. High Yield 2% Issuer Cap Index.
Linkedin-in
FOLLOW US
Copyright 2023. All Rights Reserved. Segall Bryant & Hamill is a wholly owned subsidiary of Corient Holdings.

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.

Cancel
Okay

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 contactus@sbhic.com. 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.

Cancel
Okay