notices - See details
Notices
MF
Martin Fridson (not verified)
28th January 2023 | 8:51am

It would be helpful to provide a bit of detail on the UBS models of the investment grade and high yield spreads. Some versions of this analysis use independent variables that are themselves affected by central bank intervention, so it's no surprise that they show corporate spreads at correct levels. On the other hand, the high yield spread is currently quite narrow relative to a credit availability measure derived from the Federal Reserve's quarterly survey of senior loan officers. (Percentage of banks tightening credit minus percentage easing credit.) Also tight in relation to Capacity Utilization and the five-year Treasury rate, which is inversely correlated with the spread.