Higher yields: No material impact for Investment Grade companies?
The rising cost of financing could be a headwind for companies, but investment grade (IG) companies appear to be "immune" for the next few years. Indeed, according to Bank of America, refinancing maturing debt at the current IG yield of 5.4% would reduce the coverage ratio to about 11.5x by the year 2026, which is still above the median. Source: Bank of America.
China ramps up cash injection to prevent funding stress
The People’s Bank of China offered 835 billion yuan ($121 billion) of cash via seven-day reverse repurchase contracts on Friday, resulting in an injection of 632 billion yuan on a net basis. That’s the largest one-day addition on record in data going back to 2004 - Sources: C.Barraud, Bloomberg
S&P 500 profit margin in Q4 2021: 13.4% S&P 500 profit margin in Q4 2022: 10.9%
Source: Charlie Bilello
S&P 500 Q4 GAAP earnings are down 29% year-over-year
With 84% of companies reported, S&P 500 Q4 GAAP earnings are down 29% year-over-year, the 3rd straight quarter of negative YoY growth and the largest decline since Q2 2020. Source: Charlie Bilello
US 10y yields jump to 3.84%, new 2023 high, following hotter-than-expected US PPI data
Source: Bloomberg, HolgerZ
14 economic indicators reported this week related to the US consumer and prices. 12 of them came in above expectations.
Source: Tavi Costa, Crescat Capital
Nearly half the options on S&P 500 stocks as well as on SPY and QQQ have maturities of less than 24 hours.
Source: The Daily Shot, Nomura
No refinancing pressure yet for US high yield companies!
One of the main factors supporting US high yield is technical. The U.S. high yield market is not facing an "avalanche" of new issuance because refinancing needs are very low for 2023. Therefore, the potential negative impact of rising interest rates should be limited for U.S. high yield companies for the time being. Source: Goldman Sachs
