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SocGen's 'Most Worrying Chart' Shows Markets Still Shrugging Off Political Risk

Credit spreads should be twice as wide.
Photographer: Andrew Harrer/Bloomberg

Political upheaval and the economic policy uncertainty that's accompanied it have left little impression on the corporate bond market in 2016. And that's got researchers at Societe Generale SA concerned.

Even as a wave of surprising election results and a rising populist tide ushered in regime changes in major economies, credit spreads globally are near their tightest levels of the year. Meanwhile, one measure of economic policy uncertainty — propelled upwards by the recent Italian referendum, incoming Trump administration, and a color-coded Brexit — has hit an all-time high.

That massive divergence is depicted in what SocGen Head of Emerging Market and Credit Research Guy Stear calls "the most worrying chart we know."