Is timing credit worth it?
Amid near historic lows in European credit spreads, we assess the value of buy-and-hold vs. market timing in credit in our new whitepaper.
Using the iTraxx European Performance Credit Index (ITRXPRFL) as the basis for our study, we examined whether adopting a momentum-indicator based market timing approach would have added more value than staying long. Our results challenge the popular assumption that low spreads constitute a bad entry point for credit.
- The buy-and-hold of the strategy delivered largely positive performance even at low spread levels over the last twelve years
- The roll component of the index is a meaningful source of return due to the upward sloping nature of the credit curve
- Attempting to time entry points based on 20, 60 and 120-day momentum indicators did not significantly improve performance, and actually resulted in underperformance over certain periods
« Monthly review – October 2019