February was a very volatile month in the credit markets as oil prices and concerns out of China continued to exert pressure. The month kicked off with a significantly weaker than expected US employment report. This set the tone and added to huge swings in the government bond markets. The impact of oil price action on equity markets persisted, as weekly inventories continued to grow in the US, but occasional rhetoric around production cuts or freezes from major oil producing countries provided periods of respite from declining prices.

• The leveraged loan market, as tracked by the Markit iBoxx USD Leveraged Loans Index (MiLLi) reached its lowest point on February 12th, down 1.1%, but managed to pare most of the losses and ended the month only 54bps lower on a total return basis.
• The CDS market picked up where it left off in January by continuing to widen in earnest in the opening week of February. This trend prevailed, with various CDS indices surging to multi year highs on February 11th, before retreating in the following three weeks.
• Downward pressure on crude oil prices and fresh worries around Europe's banking sector dominated negative risk sentiment in the first half of February. A rebound in commodity prices bode well for US corporate bonds, driving both Markit iBoxx $ Corporate Bond Indices investment grade (IG) and $ high yield (HY) sub-indices to end the month on a positive note: 0.7% and 0.9% total returns, respectively.
• Among developed nation government bonds, Markit iBoxx " Germany was the best performing government bond index, returning 1.6% in February. Despite the renewed appetite for risky assets during the latter half of the month, safe haven government bond yields have continued to slide, with 10-yr German bonds 24bps tighter.
• Municipal bonds had a relatively strong month in February, with benchmark 10-year general obligation bonds from California concluding the month 2bps tighter.
• Pressure on securitised products lingered, with credit paper feeling the most stress. CMBS experienced some of the worst spread performance across the entire credit curve, with all rating categories widening sharply and hitting new one year wides.

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