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Aug 31 (Reuters) – A new index that measures distress in U.S. corporate bond markets showed a slight improvement in August, data showed on Wednesday, suggesting an uptick in investor sentiment ahead of the Jackson Hole speech by the US Federal Reserve Chairman Jerome Powell in August. 26.
The New York Federal Reserve’s Corporate Bond Distress Index (CMDI), launched in June with historical data from 2005, is designed to help identify signs of market distress similar to those seen during the crisis. global financial and early 2020, and is being closely watched. by investors. Read more
The Investment Grade bond market index was 0.39 on August 26, while the junk bond market index was 0.19, compared to 0.49 for Investment Grade (a two-year high) and 0.26 for the junk bond market on July 29.
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That’s well below the 0.65 for investment-grade US bonds and 0.58 for junk bonds at the height of the COVID-19 crisis, when the Fed announced a safety net for markets. business credit.
However, the improvement in the index on August 26 is considered temporary. Spreads on Investment Grade and Junk Bonds have since widened, reflecting tighter liquidity conditions after Powell’s speech in which he said the central bank would raise rates as high as needed and hold them “for a while. to lower inflation. Read more
The spread on the ICE BofA US High Yield Index (.MERH0A0) was 490 basis points over US Treasuries on August 30, higher than 465 basis points on August 26 but tighter than 593 basis points The 4th of July.
The spread on the ICE BofA US Investment Grade Index (.MERC0A0) was 145 basis points on August 30, also wider than 142 basis points on August 26 but tighter than 165 basis points on July 4.
“The index represents a month of two halves for corporate bond markets,” said Edward Marrinan, macro strategist at SMBC Nikko Securities America.
The first half of the month had the wind in its sails of a more bullish phase driven by hopes of a hawkish Fed policy pivot, but that sentiment has now turned bearish, Marrinan said.
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Reporting by Shankar Ramakrishnan Editing by Matthew Lewis
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