Corporate Bond Investors Become More Bearish

 

By Bondsquawk

July 24, 2012

According to JP Morgan’s Credit Investor Survey published by their North America Credit Research team, bearish sentiments among institutional investors across the United States have increased for the month of July compared to the month of June.

41% of the investors expect spreads to widen over the next one month compared to 36% last month. In the current survey, 22% of the investors think that spreads will be tighter over the next month which is similar to last month. Insurance companies and asset managers are more bearish than hedge funds with nearly 50% expecting wider spreads.

The 1-year average had a composition of 37% Negative, 35% Neutral and 28% Positive whereas the 4-year average had a breakdown of 47% Negative, 34% Neutral, 20% Positive.

This most recent change has led to a decrease in the Outlook Index from 83% to 71% which indicates that investors are becoming more risk averse and expect spreads to widen further in the future. An Outlook Index of 100% suggests that investors are neutral on spreads whereas an index of less than Neutral indicates bearishness and vice-versa.

The recent outperformance of the Corporate Bond sector where spreads have tightened 19 basis points in June has failed to build momentum of favor from money managers. This recent bearishness pushed the Outlook Index lower and is near to the post-Financial crisis lows.

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Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

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