Credit Risk Changes and Equity Performance During COVID
How far do equity market movements reflect credit developments during the COVID crisis?
September 16, 2020
How far do equity market movements reflect credit developments during the COVID crisis?
After six months of market volatility, credit spreads have coincided with the much slower ascent of Consensus credit risk, suggesting the latter is a calmer indication of future credit market movement.
Consensus credit data suggests that in times of crisis, the “Solvency Boundary” between investment-grade and non-investment grade credits is more fluid than during non-crisis times. The implication for bond and equity investors is that in the current environment, not all BBB issues are the same.
The Covid19 crisis has exposed the risks in single, long and complex supply chains that are only as strong as their weakest link. Companies are moving
Rating agency downgrades have hit unprecedented levels over the past few months, but the majority of the downgrades have been for companies that were already classed as high yield. Fallen Angels – companies that cross the boundary from Investment Grade to Junk – are still in a minority, as agencies (and their corporate clients) display an understandable reluctance to avoid the “BBB cliff”.
Download the full Luxury Goods Aggregate Analytics infographic below. The Luxury Goods sector has had phenomenal success over the past ten years. Growing global middle
The BBB cliff has been widely discussed and the growing number of recent “Fallen Angels” shows that a number of corporates are falling over the
Equity markets have experienced near-record levels of volatility in the past few months and consensus credit risk estimates have also showed major changes recently. This analysis suggests that the link between credit risk and equity markets may be significant, especially in the current environment.
April’s consensus credit data shows the dramatic global impact of the Covid crisis on risk estimates.
The IMF anticipate a global recession following the COVID-19 lockdowns. A sharp spike in corporate defaults is inevitable, but this will be mitigated by various
Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.
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