iBoxx EUR Non-Financials Subordinated Index data provided by Markit Group Ltd
i) Non-Financial Corporate Hybrid Index Spreads
Corporate bond market weakness had 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 had not been shy in changing their methodology for this class of asset – and all too frequently.
The sector rediscovered its mojo post-summer 2017 as investors sought higher-yielding debt, but also on potentially less penal changes in ratings methodology due from S&P. The record low spread on the index came in late January with the index at B+178bp, having started 2018 at B+207bp.
The non-financial hybrid market though has been relatively resilient and currently is up at B+218bp (end April) – after 20bp of tightening in April. That is just 11bp wider in 2018 which is quite solid for a high beta market sector.