Kamakura Daily Corporate Bond Performance Attribution

 

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Analysis of Reasons for Today’s Bond Price Changes
From Kamakura’s KRIS service, we summarize the bond price changes and their causes for the senior fixed-rate bonds with at least $1 million in volume for the day:

Now we turn to the 20 most heavily traded corporate bonds and explain the reasons for their price changes in this chart:

These price changes are due to changes in U.S. Treasury yields (the “risk-free yield curve”), the credit quality of the issuer, liquidity risk for each bond, and the bond call price for each bond.  If we separate the reasons for the bond price changes into “changes due to rates” and “changes due to credit, liquidity and call risk,” we can focus on the bonds with the largest positive changes in credit. The top 20 credit-related gains component of bond price changes are shown here:

For the bonds above, the change due to credit, liquidity, and call risk was positive, increasing the value of the bonds.

The top 20 credit-related loss components of bond price changes are shown here.

For the bonds above, the change due to credit, liquidity, and call risk was negative, decreasing the value of the bonds.

Finally, we measure the impact of a change in U.S. Treasury yields on bond prices.  Today’s Treasury rate changes caused a gain in bond prices.  The most affected bonds had long maturities, as shown here:

Long-Term Default Outlook for Rated Public Firms
The Kamakura Expected Cumulative Default Rate, the only daily index of the credit quality of rated firms worldwide, shows the 1-year rate down 0.04% at 0.37% & 10-year up 0.18% at 11.73%.

 

Kamakura Troubled Company Index
The Kamakura Troubled Company Index®, the only daily measure of the international economy, shows worldwide corporate credit conditions up 3 points at the 94th percentile of the period 1990 to 2021, with 100 indicating best conditions.

Do Legacy Credit Ratings Have Any Value?
Credit ratings were invented in 1860, the same year as the famed Pony Express.  Like the Pony Express, the basic business model of legacy credit ratings has become outmoded.  In this daily post, we explain why ratings have fallen out of favor and why they have been replaced by modern KRIS default probabilities.  The low correlation between legacy ratings and state-of-the-art KRIS default probabilities is also updated daily.

For More Information for Personal Investments
If you would like to use modern KRIS default probabilities in your personal equity or bond investments, please visit us at The Corporate Bond Investor or contact us at info@kamakuraco.com and ask for an individual investor subscription to the KRIS default probability service.