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In these charts, top Wall Street ... (lower quality) when high-yield credit spreads are widening (high-quality bonds outperform low-quality bonds). However, the relationship has reversed since the ...
In comparison, investment-grade credit has generated returns between 3% and 5% this year, while other junk bond tiers have yielded returns between 7% and 15%. US high-yield credit set for best ...
When yield spreads widen between bond categories with different credit ratings, all else equal, it implies that the market is factoring more risk of default on the lower-grade bonds. For example, if a risk-free 10-year Treasury note is currently yielding 5% while junk bonds with the same duration are averaging 7%, then the spread between ...
The high and low of this index has varied widely. During times of financial stress, such as the Lehman Brothers or Fannie Mae and Freddie Mac bankruptcies of 2008, the Greek credit crisis of 2010, or the U.S. credit rating downgrade of 2011, the value on the index spiked. [9] It would then subsequently fall as concerns eased. [10] [11]
The lower the credit rating, the higher the spread, thus reflecting the extra yield premium demanded for greater risk. Using this model we can describe returns of, say, an A-rated security in terms of movements in the AAA curve, plus movements (tightening or widening) in the credit spread.
Last month, for instance, Procter & Gamble priced $1.35 billion five-year and 10-year bonds at a spread over U.S. Treasuries that was one of the tightest levels on record, according to Informa.
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