Credit update: How 'fast and furious' fiscal policies are moving markets

Is the worst really behind us?

The decisive speed and forceful magnitude of actions/announcements taken by the Federal Reserve to restore liquidity and confidence to financial markets over a decisive four week period from mid-March through early April has established the foundation for the credit market recovery which continues as we enter the re-opening phase of economic activity with the unofficial start of summer in the US.

Credit markets have settled into a trading range where subsequent spread movements should be more gradual and based on shifts in fundamental economic and earnings expectations. But the overall trend is expected to be toward tighter spreads in the second half of the year and into 2021.  A number of Fed actions have not yet commenced but the anticipation of such programmes has preemptively achieved the desired intent of easing conditions for the directed asset classes.  Financial markets have recovered substantially ahead of the real economy, posing risks of a pullback from a number ...