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An index that measures credit market fear rose to its highest level since 2020, as traders position for a potential surprise 75 bps rate hike from the Fed on Wednesday.
The spread on the Markit CDX North American Investment Grade Index rose 1.6 bps to 100.1, the highest level since April 8, 2020, Bloomberg News reported.
Further, the risk premium on the Bloomberg investment-grade bond index rose to 1.41 percentage points. This puts the index closer to the 1.5 investors say is a signal of broader stress for safe company bonds.
Meanwhile, US junk bonds suffered their worst day in two years Monday with yields surging to 8.43%.
“The beatings will continue until morale improves,” Bill Zox, a high-yield portfolio manager at Brandywine Global Investment Management, told Bloomberg. “But this treacherous near term setup is what creates the long-term opportunity for credit. This is when you should be legging in new commitments to credit.”
