[Outlook-in-Five] Tighter credit spreads: New trend or another false start?

Historically, credit spreads have always been a good leading indicator of future market performance, and since the end of September, global credit spreads have been tightening substantially. In Emerging Markets Credit, High Yield spreads have tightened 35 basis points and Investment Grade has come in 5 basis points. In U.S Credit the trend has been even stronger with High Yield 58 basis points tighter and Investment Grade 7 basis points tighter. Much of the rationale for the recent spread rally is pinned on a belief that the Fed has either passed its peak tightening, or the even more optimistic belief that the Fed will pivot and turn dovish in response to recent equity market weakness. Todd Schubert, Head of Fixed Income Research at Bank of Singapore, explores five reasons why investors should not chase the credit rally and remain cautious, particularly in the U.S High Yield sector. For more of our latest market insights, visit:  https://www.bankofsingapore.com/insight-listing.html?