Feb 8, 2022 - Economy

Credit jitters

CDX trading volumes
Data: ISDA SwapsInfo; Chart: Will Chase/Axios

Corporate bond managers are getting a little nervous.

The big picture: Investors are concerned that weakness in the equity market will spill over to corporate debt, especially as the cost companies pay to borrow money is on the rise, the FT reports.

By the numbers: Signs are piling up that investors who buy the bonds of riskier companies are positioning for a bumpy ride:

  • Trading volumes in the high yield CDX, an index that allows investors to protect against the risk of default jumped in January to $197 million, from $122 million the month before — that’s the highest level since March 2020, according to ISDA SwapsInfo.
  • High yield mutual funds and ETFs recorded net outflows for the last four weeks, for a total of $8.7 billion, according to data provider EPFR.
  • Short positions in ETFs that track corporate bonds have also increased, the FT noted.

The bottom line: “The market is a lot more nervous than it was at the start of the year,” Viktor Hjort, global head of credit strategy at BNP Paribas, told the FT.

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