Credit Market Overview - rubricsam.com - As at 31 March 2021 - Rubrics - Asset Management
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Credit Market Overview As at 31 March 2021 rubricsam.com
Rubrics Credit Market Overview March 2021
Measure Level 1 Month 3 Month 6 Month 12 Month
Cash Spread/Yield Changes Headline Moves :
Global IG Corp YTW (%) 1.74 0.15 0.40 0.10 -1.29
Global IG Spread (bps) 0.95 0.02 -0.05 -0.41 -1.71
• Eye-catching 12 month returns as March marked the
Global HY YTW (%) 4.64 0.11 0.17 -1.30 -5.90 1 year anniversary of the pandemic-led market low.
Global HY Spread (bps) 3.80 -0.01 -0.29 -1.75 -6.27 Notable performers include; High Yield Energy, Bank
CDS Index Spread Changes
AT1, Global High Yield, IG Energy.
CDX IG 54 1 4 -5 -69
CDX HY 308 15 14 -95 -427 • March saw a continuation of the familiar 2021 theme;
CDX EM 186 6 35 -39 -199 USD duration underperforming (USD IG Corp, EM
iTraxx Main 52 3 3 -8 -52 USD), spread related fixed income outperforming
iTraxx Xover 252 1 6 -95 -357
(Global High Yield).
Sub Fin CDS 60 -1 0 -19 -65
Cash Index Performance (%)
• While credit spreads finished the month either side
Global IG Corp Index -1.02 -3.23 -0.54 9.21
of unchanged (+2bps global IG/-1bp global HY),
Global HY Index -0.32 -0.22 6.59 23.44
carry was not enough to offset the move in duration
Global EM USD Index -1.25 -3.48 0.86 13.58
as both IG and HY finished in negative territory (the
Higher Beta Sub Sector Performance (%)
Banks AT1
latter outperforming).
2.74 4.31 9.28 26.40
Energy HY -0.06 3.60 17.37 69.08
• EUR IG once again outperformed given the relatively
EUR Corp Hybrids 0.99 0.39 4.67 14.64
contained move in the Bund curve driven by a more
Leveraged Loans -0.29 1.02 4.45 15.28
active ECB/more challenging outlook for Europe
IG Sub Sectors Performance (%)
Banks Senior generally.
0.20 -0.28 1.28 8.98
Energy IG -1.29 -3.42 2.04 23.44
• Bank AT1 and corporate hybrids performed strongest
Auto -0.93 -1.73 1.70 18.05
within the higher beta space, while energy was flat
Utility -2.69 -6.56 -4.01 7.35
Comms
as weaker oil/stronger dollar applied some pressure
-1.55 -5.82 -2.91 6.63
Airline to the complex.
-0.05 2.08 7.97 13.97
Retail -1.77 -5.34 -3.10 6.21
Currency (Hedged) Performance (%) Fixed Income ETF Performance 2021
102
iBoxx USD Corp -1.26 -5.48 -2.17 8.72
100
iBoxx GBP Corp -0.25 -4.91 -1.18 10.12
iBoxx Euro Corp 0.18 -0.75 1.20 8.68 98
Maturity Bucket Performance (%)
96
Short (1-3 Yr) -0.09 -0.02 0.54 4.39
94 LQD (Ishares IBoxx $ Corp)
Intermediate (5-10 Yr) -1.76 -4.17 -3.45 2.27
EMB (iShares JPM USD EM Bond)
Long -2.88 -8.51 -3.80 9.17
92
HYG (iShares iBoxx High Yield Corp)
Global IG Corp Index Attribution (%)
90
31-Dec-20 14-Jan-21 28-Jan-21 11-Feb-21 25-Feb-21 11-Mar-21 25-Mar-21
Carry 0.13 0.34 0.82 3.03
Source: Bloomberg as at 31/03/2021
Duration -1.01 -3.94 -4.39 -5.58
Spread -0.15 0.37 3.04 11.76
Performance -1.02 -3.23 -0.54 9.21
2Rubrics Credit Market Overview March 2021
Ratings Actions Issuance / Corporate Actions
• Oracle was downgraded from the single-As to the BBBs High Yield/Leveraged Loans
by two ratings agencies which saw its credit spreads
• US HY, US lev loan and European CLO markets all broke
widen. This did not stop Oracle issuing the largest
records for Q1 issuance volumes
technology debt deal YTD. Oracle’s total debt after is now
at all-time highs and has doubled since 2015. The move • US HY issues of note included the largest ever Airline
appears to highlight Oracle’s prioritization of shareholder bond deal as American Airlines issued debt secured by its
returns over credit ratings and balance sheet strength. flyer rewards programme. Elsewhere Fortescue, the BB+
Could we see more A rated companies follow suit? rated Australian Iron Ore miner, doubled the size of its
new issue which in-spite of this saw strong performance in
Banks the secondary market. Additionally, Neiman Marcus, the
former bankrupt luxury retailer upsized its new HY bond
• Single name banks CDS spreads widened towards month
issue to $1.1bn
end following the collapse of Archegos (Asia based hedge
fund). The event caused a ripple across multiple bank • The Euro HY market also saw an increase in issuance
prime brokerage desks. Credit Suisse is alleged to have however some indigestion was evident with most deals
posted the largest losses in relation to this event, and saw coming in at the tighter end of pricing and with less credit-
its subordinated AT1 paper trade down between 2-5 points friendly structures
across its curve, with long-call bonds the most heavily
affected. We note at this stage that volatility has been • Convertible bond issuance picked up in March with brand
contained to a handful of those firms alleged to have had name issuers coming to market (e.g. Airbnb, TripAdvisor)
the largest exposures (CS, MUFG, Nomura) and even rare convertibles issuers like Ford. Ford had
recently issued 7-year paper in the US HY market at
• Issuers continue to retire legacy bank/insurance capital 2.9%, and it was telling that they switched instead to the
via tender offers and calls. In March, CBA, NatWest, convertible market to issue a zero-coupon instrument.
Santander and Phoenix were just some of the issuers that
retired legacy debt. US Telecoms
• Issuance was heavy from the TMT sector with AT&T,
Emerging Markets
Oracle and Verizon issuing bonds in the month. Verizon
was notable for issuance across multiple currencies that
• Healthy levels of new issuance within hard currency EM
included USD, AUD, EUR and CHF in generally longer
with notable multi tranche deals from Ghana and
tenors. Meanwhile AT&T tapped into demand at the
Pakistan. Ghana included a 4 year zero coupon deal that
shorter end, issuing a multi-tranche deal with no bonds
issued at a large discount to par in a bid to alleviate short
longer than 5 years in maturity. A reflection of the decline
term cashflow pressures
in appetite for longer dated paper amongst benchmark
• Idiosyncratic pressures continue to build in EM with both credit investors perhaps.
political (Turkey, Brazil) and a re-emergence of COVID
related risks in places (e.g LATAM)
3Index Description March 2021
Measure Index Description
Global IG Corp YTW (%) Bloomberg Barclays Global Agg Corporate YTW
Global IG Spread (bps) Bloomberg Barclays Global Agg Corporate OAS
Global HY YTW (%) Bloomberg Barclays Global High Yield Corporate YTW
Global HY Spread (bps) Bloomberg Barclays Global High Yield Corporate OAS
CDX IG MARKIT CDX.NA.IG.35 12/25
CDX HY MARKIT CDX.NA.HY.35 12/25
CDX EM MARKIT CDX.EM.34 12/25
iTraxx Main MARKIT ITRX EUROPE 12/25
iTraxx Xover MARKIT ITRX EUR XOVER 12/25*
Sub Fin CDS MARKIT ITRX EUR SUB FIN 12/25
Global IG Corp Index Bloomberg Barclays Global Agg Corporate Index
Global HY Index Bloomberg Barclays Global High Yield Corporate Index
Global EM USD Index Bloomberg Barclays EM USD Aggregate Index
Banks AT1 Bloomberg Barclays European Banks Coco Tier 1 TR Index
Energy HY Bloomberg Barclays High Yield Energy TR Index
EUR Corp Hybrids Bloomberg Barclays Corp Ex Financial Hybrid Capital Securities 8% Capped
Leveraged Loans S&P/LSTA US Leveraged Loan 100 Index
Banks Sen Bloomberg Barclays Banking Senior TR Index
Energy IG Bloomberg Barclays IG Energy TR Index
Auto Bloomberg Barclays IG Auto TR Index
Utility Bloomberg Barclays IG Utility TR Index
Comms Bloomberg Barclays IG Communications TR Index
Airline Bloomberg Barclays IG Airline TR Index
Retail Bloomberg Barclays IG Retail TR Index
iBoxx USD Corp iBoxx USD Liquid Investment Gr
iBoxx GBP Corp Markit iBoxx GBP Liquid Corp
iBoxx Euro Corp IBoxx Euro Corporates Overall
Short (1-3 Yr) Bloomberg Barclays US 1-3 Year Credit Index
Intermediate (5-10 Yr) Bloomberg Barclays US 5-10 Year Credit Index
Long Bloomberg Barclays Long US Corporate Bond Index
*Source: Bloomberg
4IMPORTANT INFORMATION March 2021 Rubrics Global UCITS Funds Plc is a variable capital umbrella investment company with segregated liability between sub-funds; incorporated with limited liability in Ireland under the Companies Acts 2014 with registration number 426263; and authorised by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as amended). This document is for information only and does not constitute an offer or solicitation to deal, whether directly or indirectly, in any particular fund. Nothing in this document should be taken as an expressed or implied indication, representation, warranty or guarantee of performance whether in respect of income or capital growth. No warranty or representation is given as to the accuracy or completeness of this document and no liability is accepted for any errors or omissions that the document may contain. The Key Investor Information Documents (“KIIDs”) and prospectus (including supplements) for Rubrics Global UCITS Funds Plc are available at www.rubricsam.com. The management company of Rubrics Global UCITS Funds Plc is Carne Global Fund Managers (Ireland) Limited (the “Management Company”). The Management Company is a private limited company, incorporated in Ireland on 16 August, 2013 under registration number 377914. The investment manager of Rubrics Global UCITS Funds Plc is Rubrics Asset Management (Ireland) Limited (the "Investment Manager"). The Investment Manager is a private company registered in Ireland (reference number:613956) and regulated by the Central Bank of Ireland in the conduct of financial services (reference number:C173854). Details about the extent of its authorisation and regulation is available on request. Rubrics Asset Management (UK) Limited is an appointed representative of Laven Advisors LLP, which is authorised and regulated by the Financial Conduct Authority of the United Kingdom (Reference number: 447282). Laven Advisors LLP is not authorised to promote products to retail clients, all communications originating from either Laven Advisors LLP or Rubrics Asset Management (UK) Limited is therefore intended for professionals and eligible counterparties only. Data Source: © 2021 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. www.morningstar.co.uk. For South African investors: In the Republic of South Africa this fund is registered with the Financial Sector Conduct Authority and may be distributed to members of the public. In addition to the other information and warnings in this document, the Financial Sector Conduct Authority of South Africa requires us to tell South African recipients of this document that collective investment schemes are generally medium to long-term investments, collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending and that a schedule of fees and charges and maximum commissions is available on request from the manager. Because foreign securities are included in the investments within this collective investment scheme, we are also required to disclose to you that there may be additional risks that arise because of events in different jurisdictions: these may include, but are not limited to potential constraints on liquidity and the repatriation of funds; macroeconomic risks; political risks; foreign exchange risks; tax risks; settlement risks and potential limitations on the availability of market information. Additional Information for Switzerland: The prospectus and the Key Investor Information Documents for Switzerland, the articles of association, the annual and semi-annual report in French, and further information can be obtained free of charge from the representative in Switzerland: Carnegie Fund Services S.A., 11, rue du Général-Dufour, CH-1204 Geneva, Switzerland, tel.: + 41 22 7051178, fax: + 41 22 7051179, web: www.carnegie-fund-services.ch. The Swiss paying agent is: Banque Cantonale de Genève, 17, quai de l’Ile, CH-1204 Geneva. The last share prices can be found on www.fundinfo.com. For the shares of the Funds distributed to non-qualified investors in and from Switzerland and for the shares of the Funds distributed to qualified investors in Switzerland, the place of performance is Geneva.
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