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 and subsequent recovery – only in IG – leaves us now at a differential of 190bp. The decompression was severe but we look for that to reverse as 2018 unfolds.

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 will all be contributing factors for a broad support for the HY market.