Credit
Stock investors are taking their cues from the world of credit. Unprecedented stimulus from the Federal Reserve has pushed the credit spreads of U.S. companies most at risk of downgrade to junk status, almost back to pre-crisis levels.
Meanwhile, a bond market oddity that looked set to go extinct has made a comeback. Some 67 billion euros ($75 billion) of high-grade corporate bonds in Europe now trade with a negative yield, which effectively guarantee a loss for investors who hold them to maturity. While this is a fraction of the amount raised early this year, it’s a swift turnaround from a grand total of zero issued in late March.
Funding Markets
Another area of acute investor concern is also back to normal. U.S. commercial paper rates -- once at the crux of money-market stress -- are troubled no more. And that has contributed to the decline in three-month dollar Libor, a benchmark for rates on lending between banks.
Money managers have unprecedented central bank rescue measures to thank for the recovery. Co-ordinated action to unfreeze dollar liquidity and a slew of asset-purchase programs helped squash the spike in funding costs seen in March.
Another sign of the improvement in risk sentiment is the rapid slide in the U.S. currency. After a surge in March as investors rushed into haven assets, the Bloomberg Dollar Spot Index has slumped back toward its two-year average.
--With assistance from Ksenia Galouchko, Tasos Vossos and Justina Lee.
This article was provided by Bloomberg News.