Plotting the spread cycle
Jochen Felsenheimer, head of credit and credit derivatives strategy at HVB in Munich, looks at the factors driving the spread forecast for 2007
Many believe that the flood of liquidity central banks provided in the aftermath of 9/11 and to fight the market impact of 'Enronian economics' played a crucial role in asset price inflation during the last few years. However, while central banks can affect the amplitude of cyclical swings, they cannot affect the character of the cycle itself.
Leverage and profit growth of companies are crucial parameters for pricing equity and debt through the cycle. In chart 1, we highlight the real investment
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