Perceived Risk on High-Yield Bonds Surges Relative to Investment-Grade Debt

The video discusses recent trends in credit markets, highlighting the underperformance of investment grade debt compared to high yield bonds. It explores the shift in risk perception, with high yield bonds now seen as riskier. The video also examines the transition in the credit cycle, focusing on credit risks and the decline in bond issuance. Finally, it considers the future implications of these trends, suggesting a potential retrenchment in the credit market.

What was the performance trend of investment grade debt compared to high yield bonds at the start of the year?

• Both performed equally well.

• Investment grade debt underperformed high yield bonds.

• Investment grade debt outperformed high yield bonds.

• High yield bonds were not traded.

What factor contributed to the shift in sentiment towards high yield bonds?

• Decrease in interest rates.

• End of quantitative easing and rising interest rates.

• Increase in government spending.

• Stable economic conditions.

What is the main risk associated with the current phase of the credit cycle?

• Liquidity risk.

• Inflation risk.

• Currency risk.

• Default risk.

How does the current high yield bond issuance compare to historical levels?

• It is at its highest since 2008.

• It is at its slowest pace since 2008.

• It has not changed significantly.

• It is average compared to the last decade.

What historical event is the current high yield bond issuance compared to?

• The 2001 dot-com bubble.

• The 2008 financial crisis.

• The 2010 European debt crisis.

• The 1997 Asian financial crisis.