The Evolving Long Credit Universe

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The Evolving Long Credit Universe

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Stephen Mullin, CFA Julia Gamburg Steven Lucey
MAR 08, 2021

2020 will likely be remembered as a year of records on a number of fronts. In this paper we focus on one that has been especially salient to the fixed income universe: issuance and how it has transformed the investment grade (IG) long credit universe. Last year’s $450+ billion of long index eligible debt came on the back of an already record $289 billion issued in 20191 and will likely set a high-water mark for the foreseeable future. With the increase in volume of new credit came a commensurate growth in deal size as well as a gravitation towards the traditionally less common 20-year and 40-year tenors, satiating the demand for long duration paper. In addition to record issuance, elevated activity in corporate “liability management” exercises (LME) and ratings migration have worked to shape the evolution of the long credit universe. In this paper, we explore how these factors have altered the index not only in size, but sector exposure, issuer concentration, duration, ratings and liquidity. Lastly, we will highlight areas where we expect the index to continue evolving and potential opportunities this evolution may present.

1 Barclays Credit Research