HY-IG Spread Difference

This high yield minus investment grade spread difference chart is updated monthly

It is no coincidence that the ECB’s participation in the corporate bond market through its QE has had a profound impact on the differential in spreads between HY and IG markets.

As the chart shows, we have been at record tights between the two asset classes (159bp), but the sell-off imputing high yield more leaves us now at a differential of 216bp. The decompression from the tights has severe but we might have seen the worst of it for 2018.

The continued need from investors for yield amid low policy and market rates, the confidence in the HY market (read demand for new supply) as the global economy looks to pick up a head of steam through 2018 ought to be contributing factors for a broad support for the HY market. New deals are being absorbed very well and the record run rate of issuance in 2018 through April has not led to spread weakness.