EM and US high yield credits have come under increasing pressure in the last twelve months, especially in Q2 2022, as hawkish shifts by central banks and growing concerns about the outlook for the global economy have weighed on appetite for “risky” assets generally.
Both EM high yield and US high yield (HY) credit spreads have almost doubled in the last year; EM HY spreads have widened from 497bp to 933bp, while those for US HY have risen from 322bp to 588bp. However, the higher quality EM and US investment grade corporates have stayed relatively stable, with spreads rising only modestly during the same period.
Also worth noting is that unlike in the last episode of Fed policy tightening in 2015-2016, this time the increase in EM HY spreads has been much more pronounced than for US HY.
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