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Valens Credit Weekly Insights for April 12, 2023

April 12, 2023

Featured Top Idea
FLR – Fluor Corporation
Action: Buy 2028 4.250% Bonds CUSIP: 343412AF9 (6.596% YTW, 4.931% iYTW)

Aggregate Credit Market and Credit Fundamental Review
Since the Fed started communicating plans to aggressively raise rates in the face of inflationary pressures, the Fed has changed from a dovish benefit cost to borrow to a hawkish headwind. After the recent ~250bps rise in the risk-free rate from 2021 lows, the aggregate corporate cost to borrow has risen to levels that are at the high end of the prior bull market. They are nowhere near levels that signal a freeze or panic but are high enough to put pressure on corporates borrowing for growth. The newly elevated cost of borrowing for corporates may make refinancing decisions and growth investment decisions tougher. This is why it is important that corporations have such healthy financial statements currently.

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