Despite record low coupon issuance and a net negative issuance that is enabling technical flow to dominate any sense of releveraging risk in favor of the 'safety' of corporate bonds, the credit cycle is deteriorating rather rapidly in both the US and Europe. As these charts of the upgrade/downgrade cycle from Barclays show, things are as bad as they have been since the crisis began in terms of ratings changes among investment grade and high-yield credit. Combine that with the historically dismal seasonals for credit in the next three months and we urge caution.
The US Upgrade/Downgrade cycle is dropping rapidly...
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and seasonally things are about to get tricky...
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