The past week’s change in the slope of the Treasury yield curve was its most rapid in decades. Investors may wish to contemplate the two most recent examples of such swift steepening: the 2008 global financial crisis and 2020 COVID-19 market crisis.

Wealth managers face the challenge of matching clients’ objectives with an ever-growing set of investment products. Standard practice is to build strategic asset-allocation models based on broad capital-market assumptions. But we present a new approach.

When selecting private-credit funds, investors can often only consider broad strategies, due to the general opacity of the asset class. We draw on loan-level data and proprietary analytics to produce a more detailed picture of the direct-lending market. 

Tracking municipal-bond benchmarks can mean evaluating hundreds of thousands of securities along many dimensions, such as credit ratings. We evaluate an alternative, factor-model-based approach. 

We look at the unusual bankruptcy of Hertz Global Holdings Inc. — whose equity rallied in early June, when holders of Hertz bonds were expecting losses as high as 90% in default — to discuss the importance and subtleties of firms’ capital structures.

Clearing Brazilian forests to make way for agriculture may spur a backlash to soy and beef producers if purchasers impose deforestation-free rules. What are the potential implications for debt of affected companies and for Brazilian sovereign debt?

As the COVID-19 crisis unfolded, credit markets deteriorated under the stress of a sharply diminished economic outlook. We analyze three indicators of credit-market conditions: default risk, relative value and contagion risk.

The integration of the eurozone’s economy may tempt investors to view corporate debt issued by European companies as undifferentiated. On average, this view has seemed correct — but not always durings times of market stress.

In the post-2008 search for yield, investors have taken on considerable exposure to leveraged bank loans. We assess whether these loans pose systemic risk in the way subprime mortgages did during the last crisis.

Venezuela unfortunately finds itself on the verge of political and economic collapse. From the perspective of investors in the country’s sovereign and corporate bonds, recovery risk is now likely a bigger consideration than default risk.

Despite robust economic growth in the U.S., market conditions — as defined by tight spreads and high valuations — have wary credit investors on the lookout for trouble as the credit cycle matures. One area of scrutiny is BBB-rated credit, which sits in the middle of the rating hierarchy. Should spreads suddenly widen, investors may want to be prepared for a potential wave of BBB credits cascading into the high-yield market.

The recent trend in high-yield market spreads appears to relate more to concern about rising rates than the potential for credit losses. However, investors should be aware that the impressive recent performance of short-dated high yield bonds and floating-rate leveraged loans may be reversed if credit conditions begin to deteriorate.

As central banks continue to keep interest rates at historic lows, many institutional investors have turned to leveraged loans for their attractive yields.