We have been discussing the indications being sent by the credit markets and the turn in the credit cycle that appeared to be developing. Just to add to the pile of cyclical turn indicators, we note that the number of corporate bonds receiving S&P credit rating downgrades exceeded upgrades this quarter for the first time since Q1 2010. Obviously, this is led by the high-yield names but the withdrawal of liquidity often rapidly pushes crossover names closer to the edge and inevitably leads up the capital structure and quality spectrum.
Moody's ratings upgrade/downgrade ratio has also shifted below 1 with 191 downgrades versus 107 upgrades with 17 fallen angels versus 11 rising stars. This is also the lowest ratio since Q1 2010.