Investors are backing out of or taking active bets against high-priced corporate credit, where they anticipate a correction in response to signs of slowing economic growth that could eventually impact stocks.
In interviews and client research, global asset managers and some of the world’s biggest banks cautioned that credit pricing had reached levels consistent with a much stronger economic outlook than official forecasters anticipate for this year.
“We’ve turned very defensive in terms of developed market credit,” said Mike Riddell, lead portfolio manager for strategic bond strategies at Fidelity International.
“We have zero exposure in terms of cash bonds and are short high-yield,” he added, referring to the use of derivatives products to bet an asset class will perform badly.
The spread that measures the premium corporate bonds pay in interest over government debt, the main valuation metric for credit, dropped to just one…
