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Markets Outlook 2016: Credit homework pivotal for investors 

December 4, 2015

Eric Platt and Gavin Jackson, Financial Times

More than ever, undertaking credit homework matters for corporate bond investors. After years of relative tranquility, credit investors have been jolted by sudden and often unexpected volatility over the past 11 months.

Sliding commodity prices have duly punished highly indebted US oil and gas drillers. The emission scandal at Volkswagen and persistent concerns over drugmaker Valeant’s business model have reverberated through credit markets. Bonds issued by US retail, media and pharmaceutical companies have suffered of late, making it more expensive for companies to roll over their debts or sell new bonds.
As a new year beckons, the risk of more credit shocks looms for the US market. A steady rise in corporate bond yields since April has reflected investor concern over record sales of debt, falling revenues and profits for companies along with the prospect of the US Federal Reserve raising borrowing costs. In contrast, investors in Europe expect a smoother ride as the European Central Bank continues suppressing borrowing costs in an effort at fostering a recovery in the broad economy. Read more
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