March 9, 2020 / 3:36 PM / a month ago

Guggenheim's Minerd: Up to $1 trillion of high-grade bonds 'heading to junk'

NEW YORK, March 9 (Reuters) - Guggenheim Partners Global Chief Investment Officer Scott Minerd thinks the coronavirus-led market panic is likely to get worse.

Minerd said in an outlook paper on Monday that the firm’s models indicate that the 10-year Treasury note will reach minus 50 basis points before year-end and could “overshoot” to minus 2%.

On corporate credit, Minerd wrote that BBB bonds could “easily reach” a spread of 400 basis points over U.S. Treasuries and that high yield bonds “would follow suit,” with BB bonds at 750 basis points over and single B bonds at 1100 basis points over.

“Our estimate is that there is potentially as much as a trillion dollars of high-grade bonds heading to junk,” Minerd wrote.

On stocks, Minerd said technical analysis suggested support around 2,600 on the S&P 500 Index, with a recession scenario closer to 2,000.

Minerd, a member of the Federal Reserve Bank of New York’s Investor Advisory Committee on Financial Markets, quoted Winston Churchill about whether the virus-related market panic would end soon: “This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

Reporting by Lawrence Delevingne; Editing by Dan Grebler

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