Credit spreads forecast poll, September: Result

Market participants predicted the following result to the question:

Our first poll in the series asked our email subscribers and website readers whether credit spreads, as measured by the iBoxx Investment Grade Corporate Bond Index, would be closer to B+130bp or B+150bp by the end of September. The index closed August at B+138bp and after index constituent changes, opened September at B+140bp. The final polling result was a close call, with 54% of those who voted on the bullish side and plumping for 130bp while 46% of voters were more circumspect and suggested 150bp.

Huge supply in early September and some nerves around the Fed meeting saw spreads wider by a considerable amount to B+149bp into the middle of September, but China growth concerns escalated and the VW situation struck. We hurried past the 150bp mark and topped out at B+172bp, with weakness coming from autos and basic resources. The latter were impacted by those growth fears, with Glencore, Anglo American and ArcelorMittal particularly weaker. At B+170bp, where we end September, we are 59bp wider than where we started the year and 30bp wider on the month. It has been a very difficult month, clouded by those aforementioned events, and it looks as if we will end the year much wider versus where we started it (at B+111bp) given that the Fed, China and VW uncertainties are unlikely going to be resolved anytime soon.

For the record, the HYindex closed at B+551bp, around some 90bp wider in the month.