Looking at corporate credit there is a large divergence between different issues. Despite corporate bankruptcies on a pace not seen since 2009, credit spreads have tightened meaningfully. High-yield energy spreads have been more than cut in half since February from +1600 to +718 this morning.
Resource high-yield spreads have reverted nearly back to trade at the same spreads as high yield broadly since the U.S. dollar broke out in July of 2014. Corporate leverage broadly (median debt/ EBITDA) reached record highs this week as reported by S&P, so if you believe this ends well, you also have to believe the Fed’s next ease will involve buying of corporate bonds and monetization of debt.
Editor's Note: The snippet above is from a note written by the Hedgeye Macro team and sent to subscribers this morning. Click here to learn more.