Chart 1: The relative BBB sector spread histories YTD relative to BBB all corporates average.
Every significant relative gainer or loser reverted post peak of the crisis. This indicates that each significant sector deviation relative to the average of all corporates was an over-reaction.
Chart 2: Relative value spread pick-up for long/short pairs for the period YTD
The best sector trades YTD were long Healthcare or IT/ short Real Estate, Insurance or Energy.
Chart 3: Relative value spread pick-up for long/short pairs for the period since the COVID related credit crisis peak 25-Mar-2020
- The best sector trades since peak of crisis were long Energy/ short Real Estate or Insurance; or long Consumer Discretionary/ short Insurance.
- Most sectors maintained their relative value despite over-reacting initially.
- Insurance and Real Estate are the exception: their story flipped from relative positive at the peak to relative negative since the peak.
All charts are based on USD 5Yr constant maturity credit spreads of North American corporates.