Odd Lots
A Worrying Crack Just Appeared in the Credit Market
The correlation between rates and credit spreads is now positive.
Cracks are appearing in the credit market's resilient facade.
Photographer: DEA / ARCHIVIO J. LANGE/De Agostini EditorialThis article is for subscribers only.
For much of this year, credit investors have largely appeared to shrug off the sell-off in government bonds.
While yields in the $10.6 trillion market for corporate debt have been rising alongside those on benchmark US Treasuries, spreads (or risk premiums) had remained relatively sanguine — suggesting credit investors weren’t too worried about the impact of higher rates on this supposedly rate-sensitive asset class.