The near-term trajectory for corporate balance sheets is in particular focus as market repricing has substantially boosted returns from short-maturity credit exposure. The iBoxx $ Non-Financials BBB yield for the 1-3yr sector, for example, has climbed from 1.5% at start-year to 5.6%, and the pick-up from extending exposure beyond this (into 7-10yr) has been halved. While CTA/ trend strategies perform particularly well amidst major economic/ geopolitical shocks, short tenor corporate bond holdings may now provide steady – arguably attractive – returns if we see more stable outcomes for the US economy.
