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The Business Development Company sector in the US has grown steadily over the past 20 years. While BDCs allow retail investors to gain liquid exposure to portfolios of private companies, their historically high returns have been dented recently by some steep falls in valuations and – in some cases – discounts to net asset values.
The recent award of the 2022 Nobel memorial prize in Economics to Bernanke, Diamond and Dybvig for their work on banking regulation and liquidity highlights the connection between credit and liquidity, making the point that credit assessments are a form of market information.
The Basic Materials Industry includes Chemicals, Metals, Mining, Forestry and Paper. Output prices for these sectors have been very volatile in the past 12 months, reflecting recent rapid structural changes in the global economy. However, US Basic Materials has shown a recent turning point.
European Governments are pledging hundreds of billions of Euros in financial aid to power generators and distributors, plus support for consumers facing massive energy price hikes. But an even larger crisis may be lurking in European energy trading, with the FT reporting sector margin requirements as high as €1trillion – vastly in excess of current sector liquidity.
New EU capital rules may lead to a fivefold increase in buyside trading costs, potentially rendering this activity unprofitable. With the risk looming of a less vibrant European capital market, it is necessary for the industry, policy makers and regulators to work collectively on appropriate solutions to ensure European savers are not financially penalised.
Credit Benchmark’s Transition Matrices show that post-COVID credit recovery has been strong across most credit categories, but at the same time a significant number of investment grade firms have started to be subject to multi-notch downgrades.
Credit portfolio managers face spiking interest rates and rising defaults, and contagion from one sector to another is a major concern. Consensus credit aggregates show how credit risk correlations between sectors are changing.
This whitepaper from Credit Benchmark illustrates the global credit trends in the second quarter of 2022. Widening credit spreads show a major shift to a “risk-off” mindset, as supply shocks and rate hikes show no sign of abating. Corporate default rates are likely to spike, and across sectors correlations between default risk are changing. This whitepaper tracks these shifts across many otherwise unrated countries/sectors, as well as illustrating other global trends in Q2 2022.
The 2022 technology stock meltdown brought widespread financial damage. Markets are repricing the new reality of geopolitical tension, inflation and scarce money. But has the selloff brought opportunities?
Risk sharing transactions are a rapidly growing asset class, and have provided attractive returns over the past decade. As corporate credit becomes more unstable, emerging risks – and opportunities – highlight the need for comprehensive credit data for accurate transaction pricing. This paper details how Credit Consensus Ratings and Aggregates provide a detailed map of the credit market risk-reward landscape, including possible anomalies.
Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.
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