Valens Credit Weekly Insights for May 31, 2023

May 31, 2023

Featured Top Idea
MTDR – Matador Resources Company

Action:Close 2026 5.875% Bonds CUSIP: 576485AE6
Close 2028 6.875% Bonds CUSIP: 576485AF3

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 to cost to borrow, to a hawkish headwind. After the recent ~250bps rise in the risk-free rate from 2021 lows, 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 to borrow 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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