iBoxx EUR Non-Financials Subordinated Index data provided by Markit Group Ltd
i) Non-Financial Corporate Hybrid Index Spreads
Corporate bond market weakness has severely impacted this high beta sector. It hasn’t helped that some commodity sector companies are issuers as well as the maligned VW. The bid for this product was extremely strong well into 2015, but we since been met with some material levels of weakness. It hasn’t helped that rating agencies have not been shy in changing their methodology for this class of asset – all too frequently. The back up in yields and therefore funding costs has made it less attractive for corporates to issue the product as a form of cheap equity in order to shore up their balance sheets. still, the market has settled and borrowers are back. The product has legs in it yet for corporate issuers, but as ever continues to need lower all-in funding costs to work.
We’ve had a few non-financial corporate issues during the opening quarter of 2017 and both spreads and yields have moved tighter and lower, respectively, as investors remain content in adding higher yielding corporate debt product.