As equities wobbled this week amid intensified U.S.-China trade conflict, “the corporate credit market was relatively calm,” says a report from Moody’s Analytics published Thursday.
Compared to the CBOE Volatility Index’s (VIX) dramatic jump earlier this week, the widening of the high-yield bond spread was moderate, the report said, as was the spread of JPMorgan’s emerging market country bond index.
“Apparently, the corporate credit market does not yet expect the latest bout of trade frictions to prompt a widespread contraction of core profits capable of significantly worsening the default outlook,” the report said.
The high-yield bond market was much calmer during last year’s bouts of market volatility in February and December, Moody’s said, making it a better predictor than the VIX of financial market performance for the three months that followed.
Yields on the 10-year U.S. Treasury, the 10-year Canadian government bond and the German 10-year government bond have all declined this week.