Credit Traders Have No Room for Error in Dot-Com Bubble Redux
- BofA, Morgan Stanley grow more bearish on high-grade bonds
- BBBs may hold high-grade advantage in period of rising rates
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A growing chorus of analysts is warning that high-quality company debt may have nowhere to go but down as investment-grade spreads approach levels last seen in the lead-up to the dot-com bubble.
“The best days are behind” for corporate credit, Morgan Stanley strategists led by Srikanth Sankaran wrote in a May 16 midyear outlook. “The combination of extended valuations, less favorable technicals and a slower pace of balance sheet repair suggests that credit markets have progressed to a mid-cycle environment.”