25 February 2014 by HCM
The equity market is up on a year to date basis. It is worth to have a look at the credit performance on a year to date basis. The investment grade names are still slightly wider while the non-investment grade names are tighter. The market is looking for yield and is cautious on leveraging the investment grade. We had a good sequence of credit positive stories in the Xover index and the investment grade is subject to M&A risk. But, the Xover names are “over invested” as the only way to easily add risk to portfolios. In case of risk reversal, the Xover could gap much wider and faster than the investment grade names.