Credit Spreads Tightening Consistent With Increased Growth Expectations
It’s important to note that corporate spreads have tightened as yields have increased. This is consistent with other markets which are expecting higher growth and inflation. In equity markets cyclical sectors (financials including SME Loan(s), industrials and materials) that benefit from growth have outperformed and interest rates have increased with inflation expectations, see here. The chart below shows the BBB corporate spread and it’s lower post-election.