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Chart: Seasonality in Credit Spreads

June 21, 2018

Most people are familiar with the concept of seasonality in the stockmarket, and most of my followers will be familiar with seasonality in treasuries, but perhaps not so many people will be aware of the seasonal tendencies in the corporate bond market.  This chart shows the average seasonal pattern across the year for US High Yield credit spreads (aka Junk Bonds).  The bottom line is that there is a historical tendency for credit spreads to rise from about this time of the year through to October.  Interestingly enough, the pattern is similar for the VIX (CBOE S&P500 Volatility Index), which makes sense as they are both market measures of risk pricing.  As I've said before, you don't rely on seasonality as an investment timing indicator, but you certainly factor it in along side other information.  Given the recent shifts and shaking in credit risk pricing in Europe and Emerging Markets, it's probably worth paying attention to this chart!




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