Credit Risk Gauge Surges to 14-Month High on Powell Comments

  • In Business
  • 2022-01-26 21:28:27Z
  • By Bloomberg

(Bloomberg) -- A measure of credit risk rose on Wednesday to the highest level since November 2020 after Federal Reserve Chairman Jerome Powell said the central bank was ready to raise interest rates in March and may continue to hike to tackle inflation.

Most Read from Bloomberg

  • A Nor'easter Approaching New York Risks Becoming a Bomb Cyclone

  • Mark Zuckerberg's Stablecoin Ambitions Unravel With Diem Sale Talks

  • Stocks Drop, Yields Jump on Hawkish Powell Signals: Markets Wrap

  • Astronomers Spot Never-Before Seen Object at 4,000 Light-Years Away

  • Stock Rebound Fails and Futures Plunge on Earnings: Markets Wrap

The cost of guaranteeing the debt of a basket of investment-grade companies against default jumped as much as 1.9 basis points to 60.9 basis points in the market for CDX.NA.IG credit derivatives. In the high yield market, a basket of junk credits saw its price decline to about 106.9 cents on the dollar, the lowest level since November 2020, according to the CDX.NA.HY index.

While CDX reacted quickly to the Fed's moves, "the bigger fallout in credit could be to come," said Dominique Toublan, head of U.S. credit strategy at Barclays Plc. With bond yields broadly rising, "we will pay careful attention to the fund flows in the coming days to see if this causes outflows."

Wednesday's market moves represented a reversal from earlier in the session, when the cost of protecting the investment-grade basket had fallen as much as 2.5 basis points.

The big intraday reversal is a sign that prices in credit markets are swinging more wildly than they had before, said Travis King, head of U.S. Investment-Grade Corporates at Voya Investment Management.

"You'll probably see more IG investors using CDX to hedge positions or make tactical calls," he said.

Most Read from Bloomberg Businessweek

  • Market Turmoil Is Ultimate Test of What's Real and What's Not

  • What Happens When Russian Hackers Come for the Electrical Grid

  • The Tragicomedy of Boris Johnson Enters Its Final Act

  • Pharmacy Workers Are the Pandemic's Invisible Victims

  • The Charismatic Developer and the Ponzi Scheme That Suckered San Diego

©2022 Bloomberg L.P.


More Related News

Lagarde Says Crypto Is
Lagarde Says Crypto Is 'Worth Nothing' and Should Be Regulated

(Bloomberg) -- European Central Bank President Christine Lagarde said crypto-currencies are "based on nothing" and should be regulated to steer people away...

Singapore Still Rules China Futures Market as Hong Kong Edges In
Singapore Still Rules China Futures Market as Hong Kong Edges In

(Bloomberg) -- Six months after Hong Kong introduced equity index futures to make it easier for international investors to bet on Chinese stocks, Singapore...

BitMEX Founder Hayes Avoids Prison on Bank Secrecy Charge
BitMEX Founder Hayes Avoids Prison on Bank Secrecy Charge
  • US
  • 2022-05-20 23:22:41Z

(Bloomberg) -- BitMEX co-founder Arthur Hayes was spared from prison despite admitting he failed to guard against money laundering at the pioneering...

Retailer Rout Erased $500 Billion, Stirs Worry of More Ahead
Retailer Rout Erased $500 Billion, Stirs Worry of More Ahead

(Bloomberg) -- The wild swings in consumer stocks this week that erased about $500 billion in market value are far from over with earnings reports from well-...

'It's a Buyers Strike': Investors Weigh In on Bear Market Plunge

(Bloomberg) -- From Apple Inc. to Tesla Inc., some of the biggest names in the S&P 500 Index are fueling a relentless selloff that briefly pushed the broad...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Business