Non-Financial Corporate Hybrid Spreads and Yields

iBoxx EUR Non-Financials Subordinated Index data provided by Markit Group Ltd

i) Non-Financial Corporate Hybrid Index Spreads

The sector has had a good run in 2019. Spreads have tightened by 155bp to B+250bp (end Sept) and the index yield is just a few basis points off its record lows, at 1.74%. Subordinated debt of non-financial corporates is a good way of adding incremental yield from blue chip companies and the investor base has been extremely supportive of this asset class as underlying yields have fallen.

We’re not at record lows for spreads in the index, with around 70bp of index tightening needed. Unless there is an almighty grab for higher yielding assets in 2020, we’re unlikely going to see that record low.

ii) Non-Financial Corporate Hybrid Index Yields