Rate market fear gauge is warning for corporates

Credit quality: A jogger is seen running past the Fed building in Washington. Climbing yields are already having an impact on corporate debt sales. — AFP

NEW YORK: Corporate bonds have been relatively resilient amid a global government bond sell-off, but the strength may not last.

Bond market volatility, a measure of uncertainty about the direction of bond yields, is spiking.

Historically, that has foreshadowed trouble for corporate debt, as nervous retail investors and others pull money from the market.

For now, company profits are strong, and higher overall corporate bond yields in part reflect solid economic growth.

But, as inflationary pressure builds, the Federal Reserve (Fed) is boosting rates to slow that growth.

Over time, higher rates can hurt the economy and squeeze profits, and corporate bonds are already priced with little margin for error, said Kelly Kowalski, head of investment strategy at MassMutual.

“The longer yields are elevated and volatile, the more restrictive financial conditions become and the more they weigh on economic activity, corporate margins, and credit quality,” Kowalski said.

The result may be that company bonds eventually underperform government debt, which would boost the extra yield relative to Treasuries that companies pay to borrow, a difference known as the spread.

JPMorgan Chase & Co strategists, including Nathaniel Rosenbaum, estimated this week that US high-grade corporate bond spreads should be about 0.07 percentage point wider than they are now based on historical measures of bond and stock market volatility.

Yields across bond markets have broadly jumped in the last month as oil prices have climbed and inflation fears have risen.

Most benchmark US Treasuries now have yields above 5%, with five-year yields climbing above that threshold for the first time since 2007.

Corporate bonds have largely shrugged off these moves.

US high-grade spreads were 77 basis points (bps) last Thursday, two bps tighter than their levels at the start of the month.

Money managers looking to fund future liabilities, such as pensions and insurers that sell annuities, often buy corporate debt when yields rise, supporting relative performance for company bonds.

“There’s a lot of market experience with times where rates go up in a fairly controlled fashion because the economy is actually good, is doing well.

“And in those cases, the shocks tend to be fairly short-lived and moderate,” said Robert Tipp, head of global bonds and chief investment strategist at PGIM.

Even so, some investors are preparing for potential weakening.

The ICE BofA US Bond Market Option Volatility Estimate Index, known as the MOVE index, surged to about 105 bps this week, its highest level since March and far above its average of about 80 for the decade.

Those kinds of debt market volatility surges can be a prelude to corporate spreads rising, as in early 2023, when bond yields rose, as did the MOVE index.

But the correlation isn’t perfect.

And a separate measure of fear in US equity markets, the VIX, hasn’t jumped.

“Yield-orientated investors want higher yields, but they want stable, higher yields, and yields have been anything but stable,” said Tom Murphy, head of investment-grade credit at Columbia Threadneedle Investments.

The cost of protecting a portfolio of North American credits against default using credit derivatives has also edged higher recently, even accounting for changes to the constituents of the index, a sign that investors are getting a bit more antsy about default risk.

The CDX Investment Grade Index was around 58 bps on a roll-adjusted basis last Friday, compared with roughly 55 bps at the end of August.

Climbing yields are already having an impact on corporate debt sales.

US companies sold about US$33bil of bonds this week, falling short of the roughly US$40bil forecast by dealers.

Several borrowers paid roughly an extra six bps to investors earlier this week, and order books shrank.

Heavy investment-grade issuance in August was, in part, spurred by concerns that rates may go higher, with companies pulling forward their borrowing plans.

Issuers have now become more cautious after the recent jump in Treasury yields, said Maureen O’Connor, global head of high-grade debt syndicate at Wells Fargo.

“The conversation has become more nuanced recently.

“As 10-year Treasury yields are now comfortably north of 5%, the question has shifted to whether the bond market is oversold.

“This could be a catalyst for some opportunistic issuers to pause their funding plans,” O’Connor said.

Higher yields typically hit prices on longer-duration bonds first, and it often takes time for rising borrowing costs to translate to defaults.

If yields stay high, some companies will have trouble refinancing, particularly those that are rated in the lowest-trading CCC tier, as well as companies in private credit and software, strategists including Matthew Mish wrote in a note recently. — Bloomberg

Thank you for your report!

SoftBank raises US$11.1bil in world's biggest high-yield corporate bond sale

SoftBank raises $11.1 billion in world's biggest high-yield corporate bond sale

Chinese delivery firm SF aims to raise US$1.5bil in bond sale

信贷质量：一名慢跑者跑过华盛顿的美联储大楼。收益率攀升已对企业债券销售产生影响。——法新社

纽约：在全球政府债券抛售潮中，公司债券表现出相对的韧性，但这种强势可能不会持续。

债券市场波动率（衡量债券收益率走势不确定性的指标）正在飙升。

从历史上看，这往往预示着企业债务将出现问题，因为紧张的散户投资者和其他人会从市场撤资。

目前，公司利润强劲，企业债券整体收益率上升，部分反映了稳健的经济增长。

但是，随着通胀压力不断增加，美联储正在提高利率以减缓通胀增长。

MassMutual 投资策略主管 Kelly Kowalski 表示，随着时间的推移，利率上升会损害经济并挤压利润，而公司债券的定价已经几乎没有出错的余地。

科瓦尔斯基表示：“收益率高企且波动的时间越长，金融环境就越趋于紧缩，对经济活动、企业利润率和信贷质量的影响就越大。”

结果可能是公司债券最终表现逊于政​​府债券，这将提高公司借款相对于国债的额外收益率，这种差额被称为利差。

摩根大通公司的策略师，包括纳撒尼尔·罗森鲍姆，本周估计，根据债券和股票市场波动性的历史指标，美国高等级公司债券的利差应该比现在扩大约 0.07 个百分点。

由于油价上涨和通胀担忧加剧，过去一个月债券市场收益率普遍上涨。

目前大多数美国基准国债收益率均高于 5%，其中五年期国债收益率自 2007 年以来首次突破该门槛。

公司债券基本未受这些举措的影响。

上周四，美国优质原油价差为 77 个基点 (bps)，比月初的水平收窄了 2 个基点。

为未来负债筹集资金的资金管理机构，例如养老金和销售年金的保险公司，通常会在收益率上升时购买公司债券，从而支撑公司债券的相对表现。

“在经济形势良好、发展顺利的情况下，利率上涨往往是可控的，这在市场中有很多经验可供参考。

“在这些情况下，冲击往往持续时间较短且程度较轻，”PGIM全球债券主管兼首席投资策略师罗伯特·蒂普表示。

即便如此，一些投资者仍在为潜在的市场疲软做准备。

ICE BofA 美国债券市场期权波动率估计指数（简称 MOVE 指数）本周飙升至约 105 个基点，达到 3 月以来的最高水平，远高于过去十年约 80 个基点的平均水平。

这种债务市场波动加剧可能是企业债券利差上升的前兆，就像 2023 年初债券收益率上升时一样，MOVE 指数也随之上升。

但这种相关性并不完美。

衡量美国股市恐慌情绪的另一项指标——VIX指数——也没有飙升。

“以收益为导向的投资者想要更高的收益，但他们想要的是稳定且更高的收益，而目前的收益却一点也不稳定，”哥伦比亚Threadneedle投资公司投资级信贷主管汤姆·墨菲表示。

最近，即使考虑到指数成分股的变化，使用信用衍生品保护北美信贷组合免受违约影响的成本也略有上升，这表明投资者对违约风险越来越感到不安。

上周五，CDX投资级指数经滚动调整后约为58个基点，而8月底约为55个基点。

收益率攀升已经对企业债券销售产生了影响。

本周美国公司发行了约330亿美元的债券，低于交易商预测的约400亿美元。

本周早些时候，一些借款人向投资者额外支付了大约 6 个基点，导致订单量减少。

8 月份投资级债券的大量发行，部分原因是人们担心利率可能会上升，导致企业提前启动借款计划。

富国银行高等级债务银团全球主管莫琳·奥康纳表示，在国债收益率近期大幅上涨之后，发行人现在变得更加谨慎。

“最近的讨论变得更加细致入微了。”

“由于 10 年期美国国债收益率目前已轻松超过 5%，问题已经转移到债券市场是否超卖。

奥康纳表示：“这可能会促使一些投机取巧的发行人暂停其融资计划。”

收益率上升通常会首先影响长期债券的价格，而且借贷成本上升往往需要一段时间才会转化为违约。

彭博社近期在一份报告中指出，如果收益率居高不下，一些公司将难以进行再融资，尤其是那些信用评级处于最低交易级别CCC级的公司，以及私募信贷和软件行业的公司。马修·米什等策略师也表达了类似的观点。

感谢您的报告！

软银发行全球最大规模高收益公司债券，筹集资金111亿美元

软银发行全球最大规模高收益公司债券，筹集资金111亿美元

中国快递公司顺丰计划通过债券发行筹集15亿美元。