Global Credit Strategy: What We're Watching

Research evidence excerpt

Global Credit Strategy: What We're Watching

.1%. The Kelvin Pang

Strategist

curve bull-flattened, while there was little dispersion across ratings. Autos and media outperformed, while insurance, services and basic industry

Kelvin.Pang@morganstanley.com

lagged. European IG inflows rose to ~$900m (0.1% of AUM). These inflows were heavily concentrated in ETFs, while mutual fund flows remained +852 2848 8204

muted. The headline figure was weighed down by the full redemption of a 2026 fixed maturity fund. Issuance moderated with €14bn of bonds pricing

last week, lifting YTD volumes to €317bn (+0% YoY). Morgan Stanley & Co. LLC

Christina Sigler EU High Yield: EU HY outperformed IG, with spreads tightening by 13bp last week resulting in excess returns of +0.4%. The moves were

accompanied by compression across ratings led by CCCs. Basic industry and capital goods tightened the most, while media lagged. European HY Strategist

fund net inflows accelerated to ~$720mln / 0.6% of AUM, the strongest weekly figure since early February. These inflows were skewed towards ETFs. Christina.Sigler@morganstanley.com

YTD supply is tracking at €61bn (+27% YoY). +1 212.761.4116

Credit Derivatives: Spreads widened across CDS indices, with CDX IG and iTraxx Main ending the week 1bp and 2bp wider, respectively. DTCC data

as of 8th May showed that investors net sold protection on CDX IG and HY over the past two week. Meanwhile, investors increased net protection

buying in iTraxx Main and XO over the same period. Implied volatility ticked higher last week from the lowest levels seen since February.

Asia Credit: Asia Credit spread tightened by 4bp over the last week, while APAC Credit tightened by 2bp. In Asia credit, Asia HY (-10bp) outperformed

Asia IG (-3bp).