Credit

The idea below is that higher economic activity equates to higher breakevens, and thus has bearing on the probability of default. It is very noisy, and of very marginal use.

Such a graph suggests current spreads (the big pink dot) are attractive, something we disagree with.

Looking at a range of spreads, the general picture is one of fairly tight spreads, and not emblematic of a bargain.

Our preferred measure remains the excess bond premia, which is calculated after netting out expected defaults, from duration matched corporates relative to treasuries, and continues to tell us that spreads are not yet full enough.

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