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Takeaway: Complacency about the credit cycle is at YTD highs, especially in commodity-related sectors.

Editor's Note: Below is #CreditCycle analysis via our Macro team in a note sent to subscribers earlier this morning. 

The Evolving Complacency In Credit Markets - credit cycle

With renewed expectations for Fed intervention on growth slowing and the precedent of Central Bankers buying corporate bonds in Europe, bond market volatility expectations have been smashed.

The MOVE index is at a level not seen since 2014. High yield spreads have nearly returned to their 2015 averages. Energy OAS is below 2015 averages after trading +600 over that level back in Febraury, and materials and industrials spreads have nearly reverted back to 2015 levels.

What's changed? Expectations certainly have:

  1. Spreads being well-off 2014 cycle lows;
  2. Consumption rolling over; and
  3. Jobless claims picking up

A confluence of data suggests the cycle still cycles.

The Evolving Complacency In Credit Markets - credit spreads 5 13