Schroders Credit Lens GBP Investor Perspective

Credit spreads have tightened back to historic extremes (3-9th percentile for IG), providing little valuation cushion despite supportive fundamentals. Large-scale tech issuance and rising default rates are key emerging themes.

Key Takeaways

• 1.Credit spreads have returned to exceptionally tight historical levels, offering a minimal margin of safety against further widening.
• 2.Emerging stress signs include rising US High Yield default rates and a recent trend of 'fallen angels' outpacing 'rising stars'.
• 3.Bond issuance by 'Hyperscaler' technology companies is soaring and expected to continue reshaping the market.

Table of Contents

• Summary
• Cross-credit analysis
• IG long vs short
• Corporate credit: valuation
• Corporate credit: fundamentals and technicals

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