This monologue podcast features Andrew Sheets, head of Corporate Credit Research at Morgan Stanley, discussing the implications of rising bond yields on corporate credit. He begins by outlining his previous forecast for a positive first half of the year for credit, then explains how recent increases in bond yields, while surprising, don't necessarily invalidate that forecast. Sheets argues that the yield increases reflect a strong U.S. economy and less need for Fed intervention, which could be positive for credit markets. He acknowledges higher yields pose challenges for lower-rated credit but suggests that higher cash reserves and improved supply-demand dynamics could offset the impact for investment-grade corporate bonds. Specifically, he notes that current yields are still near their 24-month average and that the longer-term investment-grade market is particularly well-positioned.
