That spread is rich March 28, 2012 at 6:12 am
No, not an advertisement for the new chocolate Philadelphia, but rather a comment on the ratio of the default to non-default component of credit spreads. The following is from Citi investment research, via FT alphaville:
Now, note that tihs isn’t quite as straightforward as it looks: we are comparing current default rates with compensation for future risk, so it isn’t entirely clear that credit spreads are rich – if defaults in the future are much higher, then they might not be. Still, it does look as if now might be a good time to take (a diversified pool of) corporate credit risk.