Credit risk not interest rates sparked equity rotation, Citi says
Investing.com -- Fears that companies could default on thier bond repayments, or credit risk, rather than potential Federal Reserve policy action, is now the primary concern for investors and the likely reason for the latest equity market rotation, according to analysts at Citi.
The reversal or underperformance came in the wake of a jump in implied and actual credit spreads - the difference between the yield on a corporate bond and a Treasury of the same maturity - since late July while the implied 10-year yield barely moved."This clearly indicates that credit has become the key risk concern for equity investors," Citi added.
The roughly unchanged equity implied 10-year yield, or market expectations for future rates and returns of the 10-year Treasury, is worth noting as it came during period in which the 10-year Treasury dropped significantly in the last couple of weeks.
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