The impact of low energy prices is rippling through the debt markets for bonds issued by energy related companies. The S&P 500 Bond Index has returned a modestly negative total return of -0.31% year-to-date while the energy bond sector tracked in the S&P 500 Energy Corporate Bond Index is down 5.79% year-to-date.
Table 1: Select Sector Indices from the S&P 500 Bond Index family:
The credit default market also has reacted. The cost of buying default protection on the debt of the 10 entities in the S&P/ISDA CDS U.S. Energy Select 10 Index has shot upward by over 150% since May 1st 2015 from 213bps to end December 3rd 2015 at 539bps. This could be an indication that market participants are expecting more downward pressure for this sector over the near term.
Chart 1: Select S&P/ISDA U.S. CDS Indices
Table 2: The 10 entities in the S&P/ISDA U.S. Energy Select 10 Index as of December 3rd 2015:
|Anadarko Petroleum Corp.|
|Chesapeake Energy Corp.|
|Devon Energy Corporation|
|Kinder Morgan Energy Partners LP|
|Peabody Energy Corporation|
|Valero Energy Corp.|
|Williams Companies, Inc./The