Two credit markets may offer opportunities
Rob Waldner. Chief Strategist, Head of Macro Research, Invesco Fixed Income
The economic sudden stop and related spike in demand for credit caused some of the sharpest corrections ever seen across US credit asset classes.
The growth slowdown was magnified by tightening financial conditions, resulting in indiscriminate spread widening across credit asset classes. The US Federal Reserve (Fed) has implemented a number of programs to ease financial conditions and support liquidity in high quality asset classes, such as agency mortgages and investment grade corporates. We see signs that the Fed’s programs are starting to support the efficient functioning of these markets.
There are some credit markets where we believe fundamentals are largely solid, but have not received direct support from the Fed. These credit markets may offer opportunity to investors who are looking for assets with good fundamentals but that have been marked down in price during the recent correction. The municipal bond market and the mortgage credit market may be two areas to look at.
