The Credit Superhighway

Fixed income is not just one asset class, but rather a broad array of markets ranging from “risk-free” bonds (US Treasuries), with a guaranty of repayment by the US government, to highly speculative instruments (distressed debt) with a meaningful risk of default. Corporate credit, the focus of this course, sits between Treasuries and stocks on the risk spectrum, and includes investment grade bonds, high yield bonds, broadly syndicated loans, private direct loans, and asset-backed securities (ABS) issued by corporations, both public and private. The combined corporate bond and loan market has a market capitalization approaching $16 trillion, and has roughly doubled in size since the Global Financial Crisis. And this doesn’t even include the “corporate adjacent” asset-backed debt issued by public and private companies which have come to rely on multiple pools of capital to finance operations, capex, M&A (including LBOs), and shareholder payouts. The era of low interest rates resulting from the GFC sent pensions, insurance companies, and balanced mutual funds scrambling for new sources of yield. This course provides an overview of these markets to answer two overarching questions: Why do investors choose to buy corporate debt? And, how do they decide which instruments to buy?