GM: cause and effect

A confluence of factors caused spreads to widen in March, and GM’s profit warning was the trigger. Deutsche Bank’s Gary Jenkins and Jim Reid offer their thoughts on the matter

Since the dark days of October 2002, the credit markets have enjoyed a long period of consistent outperformance. Spreads have been grinding in as defaults reduced and event risk slowed to a crawl. Indeed, the last 18 months have in many ways been the ‘golden era’ for credit as the asset class has benefited from an almost perfect backdrop of strong economic growth coupled with low bond yields.

As a result the market has enjoyed good support both fundamentally and technically. In the second half