The Markit iTraxx Crossover Index, a gauge of credit risk for Europe's junk bonds, has dropped to its lowest level since April 2022. This decrease in credit risk is attributed to global market rallies and the belief that global interest rates have peaked. The index is currently well below its March high of over 500 basis points during a global banking crisis. The gauge tracking high-grade firms' credit default swaps (CDS) has also eased. However, experts caution that the CDS indices may have reached their lowest levels and picking up protection becomes increasingly attractive. The European Central Bank and the Bank of England are tempering speculation of rate cuts and are monitoring inflation persistence. Despite a soft US inflation print, there may be a lag before other regions follow suit. Shanawaz Bhimji, head of corporate bond research at ABN Amro Bank NV, believes that high-yield firms will struggle to grow out of their debt levels due to a weak economy. [4e8a1fc5]
Despite the recent drop in credit risk for European junk bonds, experts caution that the indices may have reached their lowest levels and that picking up protection becomes increasingly attractive. The Markit iTraxx Crossover Index, which measures credit risk for Europe's junk bonds, has reached its lowest level since April 2022. This decrease in credit risk is attributed to global market rallies and the belief that global interest rates have peaked. The index is currently well below its March high of over 500 basis points during a global banking crisis. The gauge tracking high-grade firms' credit default swaps (CDS) has also eased. However, experts warn that the current low levels of the CDS indices may not be sustainable, and investors may find it more appealing to seek protection. The European Central Bank and the Bank of England are closely monitoring inflation persistence and are not indicating any immediate rate cuts. While the US has seen soft inflation data, other regions may take longer to follow suit. Shanawaz Bhimji, head of corporate bond research at ABN Amro Bank NV, predicts that high-yield firms will face challenges in reducing their debt levels due to a weak economy. [4e8a1fc5]
The Markit iTraxx Crossover Index, a measure of credit risk for European junk bonds, has dropped to its lowest level since April 2022. This decline in credit risk is attributed to global market rallies and the belief that global interest rates have peaked. The index is currently well below its March peak of over 500 basis points during a global banking crisis. The gauge tracking credit default swaps (CDS) for high-grade firms has also eased. However, experts caution that the current low levels of the CDS indices may not be sustainable, and investors may find it increasingly attractive to seek protection. The European Central Bank and the Bank of England are closely monitoring inflation persistence and are not indicating any immediate rate cuts. While the US has experienced soft inflation data, other regions may take longer to follow suit. Shanawaz Bhimji, head of corporate bond research at ABN Amro Bank NV, believes that high-yield firms will face challenges in reducing their debt levels due to a weak economy. [4e8a1fc5]