The impact of Covid-19 on global high yield

SINGAPORE (Mar 8): Credit spreads widened sharply in March as investors reallocated from higher risk assets to safer ones. Companies struggled to access bond markets as a result. Credit-rating agencies have also downgraded many companies as more countries have gone into lockdown, hurting all borrowers and weaker ones in particular.

At the same time, the speed and scale of combined policy responses by governments and central banks have been unprecedented. The vulnerabilities in the high-yield market — highlighted by negative total returns seen in March — could be somewhat offset by the crisis response measures. Although there can be no guarantees, particularly given the uncertainty over the duration of this health crisis and the economic shock it has triggered, investors may look back on this period as an attractive entry point into high yield.