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 now have 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 makes it less attractive for corporates to issue the product as a form of cheap equity in order to shore up their balance sheets. We dare say, that once/if the market settles, that borrowers will be back. The product has legs in it yet for corporate issuers, but needs lower all-in funding costs to work.