16 May 2014 by HCM
If one looks at what happened with European credits since the beginning of the year, the market knew only one direction: up (or actually down if you look at risk premia). There were a couple of road bumps along the way, but investors hardly took their feet of the gas pedal. The story is quite different when one considers the high yield market in the US. A string of disappointing results among consumer cyclicals since Christmas in particular have weighted heavily on the sector, and the CDXHY is actually wider on the year. Investors had to rely on the carry of their positions to compensate for the widening of the index risk premium. The same is almost true for US investment grade corporates. People are still questioning the strength of the recovery.