Credit Calls

Research evidence excerpt

Credit Calls

Morgan HY Chemicals

Index has returned 411bp year to date compared to the total return of 166bp for the broader

J.P. Morgan HY Index. Over the last week, Chemicals has returned -35bp vs -39bp for the

broader HY Index.

Credit Market Outlook & Strategy: Yields going hyper-bolic should be supportive for

spreads near term (Nathaniel Rosenbaum, CFA)

“At the end of the day, HG investors buy yields not spreads.” This old adage from a much

wiser strategist rang true this week as yields hit fresh new highs. Long-end yields at their

highest since November 2023 should be positive for spreads, in our view, just as they were

last March. The only major difference between now and then though is that market is now

pricing in 2 hikes through mid-2027 and the Iran conflict is seemingly not headed towards

any kind of final resolution. So higher yields are still a positive for spreads, but the magnitude

seems more uncertain this time. If we see yield buyers step in (domestic insurance and/or

Taiwan, for example), we'd expect this to lead to a flatter 10s30s spread curve.

Credit Strategy Weekly Update: High Yield and Leveraged Loan Research (Nelson

Jantzen, CFA)

High-yield bond spreads widened modestly over the past week as investors absorbed a

Fed outcome, solid earnings, sector dispersion and a lighter calendar

($3.0bn).Meanwhile, 2Q results for HY companies are off to a strong start with earnings

beating at an exceptional rate and guidance also very strong (High Yield Earnings Tracker).

And widening 39bp this week, HY HPC index spreads are 400bp or 114bp wider in July.

High-yield bond yields declined 4bp while spreads widened 4bp w/w to 7.49% and

317bp, which are up 24bp and 11bp in July and up 71bp and 3bp YTD. HY bonds are