Correlating credit

chart of the month

“Credit spreads have a stronger correlation to equity volatility than with the actual level of the equity markets,” says Ben Bennett, credit strategist at BNP Paribas. As the chart shows, the correlation is in fact remarkably high.

According to Bennett: “The strength of the link between equities and credit spreads has been overstated in the past. In reality the relationship between credit spreads and equities has typically been a fragile one, other than in times of distress.” Bennett points out

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