Investment-grade corporate credit risk surged higher Friday, markets reacting negatively to higher than estimated May CPI of 1.0% vs. 0.07%, compared to 0.3% in April. Short end rates hammered (2YY over 3.0% at 3.0424% - highest since 2008), stocks reacted negatively (ESM2 -100.0 3916.25) as markets priced in more aggressive rate hikes from the Fed to combat inflation.
- Investment grade risk measured by Markit's CDXIG5 index as May 20 levels: +4.606 at 91.994; CDXHY5 high yield index at 98.715 (-1.278).
- Outperforming credit sectors (tighter or least wide): Materials and Sr Financials both (+2.2) followed by Consumer Discretionary (+2.5) and subordinated Financials (+2.9).
- Lagging sectors (wider or least narrow): Communications (+5.6), followed by Technology (+4.3) and Energy (+4.0).