Given the spread widening that has occurred in credit over the past 18 months, Nikko Asset Management Australia’s credit team has been trying to determine when it makes sense to increase our credit exposure. We have generally been of the view that being risk-averse through the US Federal Reserve’s hiking period (at least in the early stages) made the most sense as volatility would return to the market. Given that the Fed’s January statement indicates that its outlook is a little more dovish than expected, the end of this risk-off period could be coming closer. We have analysed the potential outcomes for credit spreads under different scenarios, including a theoretical recession, and believe that the time for getting back into credit may be nigh. (VIEW LINK)

James Marlay

This is a great read, thank you for sharing and some very interesting observations.