1st October 2015

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.

Suki Mann

A 30+ year veteran of the European corporate bond markets and in his role as Credit Strategist, Dr Mann has been ranked number one in the Euromoney Investor Survey eight times in ten years. Previously with Societe Generale and UBS, he now shares views of events in the corporate bond market exclusively here on CreditMarketDaily.com.