Monday, November 10, 2008

Credit Risk Analysis

Below are the historical yields of the following fixed income indices; Treasury, U.S. Investment Grade / High Yield, and Emerging Market.

Of note is the recent spike in the cost of borrowing for Emerging Market countries. Emerging Markets were supposed to provide the cushion to our global economy, but as the NY Times pointed out on October 7th:

Many of the world’s fastest-growing economies thought they had insulated themselves from problems in the developed world. But economists said that simultaneous turmoil in Europe and the United States was too much to bear. “The potential of a global recession is awakening emerging markets that they will be hit stronger than we thought before,” Alfredo CoutiƱo, a senior economist at Moody’s, the credit rating agency, told The Times.
Source: Barclays