Completed 11 May 2018 12:42 PM EDT Disseminated 11 May 2018 12:43 PM EDT

North America Credit Research

11 May 2018

How big is the BBB- risk?

Likely a problem in the next downturn, but not for now

 The amount of BBB- rated Non-Financials bonds has grown by $240bn

(+70%) to $575bn over the past 4 years. They now represent 16% of the USD 

HG bond market. The rate of growth for the BBB- market is 1.5x the rate of 

growth of the HG non-Financial market overall, according to J.P. Morgan. 

 This increases the risk to HG investors in the next recession or sector 

disruption period. However, so far the growth of BBB- has been concentrated 

in Energy and Healthcare.

 The BBB- bucket is not stable with 25% of bonds rated BBB- on Jan 1st not 

in the BBB- category by YE on average, over the past four years.

 M&A accounts for 30% of the new additions to BBB-, the commodity sectors 

account for 18%, upgrades from HY account for 20% and other reasons

account for the remaining 32%, over the past four years.

 Bonds have been leaving BBB- at a rapid but slower rate than entering since 

YE 2013. Encouragingly, only 23% of the BBB- debt was downgraded to 

HY, and 3/4 of the debt was in commodities (which are improving rapidly 

now). Bonds upgraded from BBB- account for 60% of the BBB-; leavers and 

maturities/tenders account for the other 17%.

 The BBB market is currently 4.3x the size of the BB market, vs 2.0x 10yrs 

ago (according to J.P. Morgan). Hence, HY might struggle to absorb fallen 

angels in quantity, if/when this happens. Higher leverage of HG issues and a 

more ratings-sensitive investor base should also matter in the next downturn. 

 Recent rating trends are quite positive, as 2017 saw the lowest rate of BBBdowngrades to HY in 30 years, per Moody’s.

 In this note we look at the drivers of the growth of BBB- credits to better 

understand how we got to this situation over the past few years. We also look

at a long-term history of downgrades to understand how ratings may evolve in 

the next downturn. The largest issuers currently rated BBB- or those that have 

moved in or out of that rating bucket are discussed in the Appendix. The 

current period references YE 2017. 

BBB- debt has grown substantially, driven by Energy and Healthcare

160

140

120

100

80

60

40

20

0

15 18

5 0

29

11 11 14 13

35 40

63

37 36

61

12 13

23 25 26 35 43 44

65

92

148

2013 2017

$bn BBB- debt in JULI Non-Fins ex EM by sector 

Source: J.P. Morgan

See page 13 for analyst certification and important disclosures.

US High Grade Strategy & Credit 

Derivatives Research

Eric Beinstein AC

(1-212) 834-4211

eric.beinstein@jpmorgan.com

Dominique Toublan

(1-212) 834-2370

dominique.d.toublan@jpmorgan.com

Paul Glezer

(1-212) 270-8185

paul.x.glezer@jpmorgan.com

Pavan D Talreja

(1-212) 834-2051

pavan.talreja@jpmorgan.com

Sheila Xie

(1-212) 834-3036

sheila.xie@jpmorgan.com

J.P. Morgan Securities LLC

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the 

firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in 

making their investment decision.

www.jpmorganmarkets.com
 

Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

The amount of BBB- rated corporate debt has grown faster 

than the rest of the High Grade market

Over the past few years the rapid growth of the HG bond market and the increase in 

leverage on the balance sheet of many issuers has led to even more rapid growth in 

the lowest rated High Grade rating category of BBB-. 

While across non-Financial issuers the percentage of debt in each rating category has 

actually been relatively stable, the BBB- category has increased from 11% of debt in 

2012 to 16% in 2017 (see below). In our JULI index as of YE17, there was $718bn 

of BBB- debt, which represents 14% of $5.1tn in total debt. This is based on face 

value, not market value, and excluding EM issuers. Of the $718bn of BBB- rated 

debt, $143bn was Financials (20%) and $575bn was non-Financials (80%). In this 

note we focus on the non-Financial portion. 

Exhibit 1: BBB- debt represents 16% of non-Financial debt as of YE 2017, up from 11% of YE 2012

100%

BBBBBB

BBB+

13% 11% 14% 14% 16% 16% 16%

19% 24% 22% 21% 19% 19% 18%

17% 17% 17% 18% 21% 19% 20%

17% 17% 15% 14% 13% 17% 16%

16% 13% 14% 16% 13% 11% 11%

8% 8% 7% 6% 7% 9% 10%

10% 10% 10% 10% 11% 10% 9%

2011 2012 2013 2014 2015 2016 2017

AA and higher 90%

80% A+

70%

A 60%

50% A40%

30%

20%

10%

0%

Source: J.P. Morgan, Moody’s, S&P

Over the past four years, the leverage of HG non-Financial issuers has risen 

substantially, leading to rating downgrades Leverage for HG overall has risen 

from 2.2x to 2.8x between 2013 and 2017, in our calculation. This raises the question 

as to whether the rating agencies are being too lenient in their ratings. We are not 

attempting to answer this question in this note directly. Instead, we look into the 

growth of the BBB- segment to better understand the drivers and the risks. This 

sheds some light on the likely progression of these credits over time to either a 

stronger High Grade rating or into High Yield. We also look at the longer time series 

of transitions from BBB- to higher and lower ratings as a reminder of what may 

happen to these credits in different parts of the economic cycle. 

Note that we focus on non-Financials ex EM in this note for a few reasons. First, just 

9% of Financial bonds are rated BBB-, vs 16% of non-Financials. Four years ago 7% 

of Financial bonds were BBB- so the figure has grown but it remains low. Second, a 

significant portion of the BBB- bonds from Financials are subordinated bonds from 

higher rated issuers. Third, the rating agency methodology for Financials has 

changed since the credit crisis, such that rating migration over time has been driven 

more by these methodology changes than by changes to the credit fundamentals of 

the issuers. 

2
 

 

Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

The BBB- rating category is not a stable one, with an average of 25% of the 

bonds rated BBB- at the beginning of a year not in the BBB- category by the 

end of the year. This is based on 4 years of JULI data, and using the lower of S&P 

and Moody’s rating. The change in the amount of BBB- bonds each year is the 

difference between the amounts of bonds newly rated BBB- (which we call ‘joiners’ 

in this note) and the amounts which leave the rating category (which we call 

‘leavers’). 

The exhibit below shows the BBB- joiners and leavers over the past four years. It 

indicates that the recent increase in BBB- debt has been driven by an increase in 

joiners rather than a decline in leavers. However, it is key to understand the dynamics 

of the joiners and the leavers. For instance, it is positive if a joiner is a Rising Star, 

but negative if the joiner comes from higher credit rating buckets. Similarly, it is 

positive if the leaver is due to an upgrade or to debt maturing, and negative if it is the 

result of a downgrade to HY. We analyze this in detail below.

Exhibit 2: The increase in BBB- rated bonds in JULI has been driven by an increase in newly 

rated BBB- debt rather than a fall in debt leaving the BBB- category

225

175

125

75

25

-25

-75

-125

-175

203 $bn 189 178

BBB- 111

-159

joiners

BBBleavers

BBB- net -68 -95 joiners/ -116 leavers

2014 2015 2016 2017

Source: J.P. Morgan, Moody’s, S&P

Breaking down joiners and leavers of BBB-: Major drivers 

are M&A, the commodity sectors and Rising Stars

The growth in the amount of BBB- rated debt has been driven by several factors. 

Downgrades due to M&A, the sharp fall in commodity prices in 2015 and 2016 and 

the general deterioration in credit in some issuers all played a significant part. Over 

the past four years M&A explains 30% of the new additions to BBB-, the commodity 

sectors explain 18%, upgrades from HY explain 20% and all other reasons explain 

the remaining 32%. 

The upgrades to BBB- from HY are an interesting issue because, while these 

upgrades increase the amount of BBB- debt, we would argue that this is a good 

reason for more BBB- debt. This is different to credits which are downgraded from a 

higher rating bucket which is a bad reason for more BBB- bonds. Therefore we 

break out these categories separately in the exhibit below.

The other half of the equation explaining the change to the amount of BBB- debt is 

the understanding of why bonds that were once rated BBB- no longer have this 

rating. We break the BBB- leavers into four categories. Bonds upgraded to midBBB or higher (60% of the BBB- leavers over the past four years), bonds 

downgraded from BBB- to HY in the commodity sectors (17%), bonds downgraded 

to HY in all other sectors (6%) and bonds which matured or were tendered (17%). 

3
 

Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

The bonds upgraded from BBB- to a higher rating category and the bonds which 

matured are good reasons to leave BBB-, so these categories are shaded in green 

below. Bonds downgraded further to HY are bad reasons to leave BBB- so these 

categories are shaded in red.

Exhibit 3: Breaking out the drivers in growth of BBB- bonds. Downgrades due to M&A and due to commodities have been the key drivers 

over the past few years. A significant amount of upgrades from HY to BBB- have also contributed to the growth.

DG= Downgrade, UG = Upgrade

225

175

125

75

25

-25

-75

-125

-175

UG: mid-BBB and above, -

$55bn

Maturities, -$9bn

DG: Commod., -$20bn

UG: from HY, $90bn

UG: from HY, $8bn UG: from HY, $10bn UG: from HY, $27bn

DG: M&A, $27bn

DG: M&A, $78bn

DG: M&A, $16bn

DG: Commod., $10bn

DG: Commod., $33bn

DG: Commod., $27bn

DG: Other, $67bn

DG: Other, $42bn

UG: mid-BBB and above, -

$83bn

UG: mid-BBB and above, -

$46bn

Maturities, -$28bn

Maturities, -$11bn

UG: mid-BBB and above, -

$82bn

Maturities, -$25bn

DG: Commod., -$44bn

BBB- Joiners 

DG: Other, $52bn

DG: M&A, $86bn

DG: Commod., $49bn

DG: Other, $59bn

DG: Other, -$4bn DG: Commod., -$8bn

DG: Other, -$11bn

DG: Other, -$4bn DG: Commod., -$1bn

BBB- Leavers 

DG: Other, -$8bn

2014 2015 2016 2017

Source: J.P. Morgan, Moody’s, S&P

Overall the analysis highlights the importance of the commodity cycle and the 

significant upgrades from HY to HG in growing the size of the BBB- category.

If we exclude the commodity sector and these upgrades, the size of the BBBcategory would have grown by about $65bn over the past four years instead of about 

$240bn. The reason we believe this is an interesting figure to calculate is that 

upgrades from HY are a positive credit dynamic. Also, the commodity cycle was a 

supply driven one caused primarily by technology change and more energy supply, 

than a broader economic issue. The cycle has turned strongly positive recently. This 

dynamic is clear in 2017 when 96% of the bonds which left BBB- during the year 

were either upgraded to HG or matured, and only 4% were downgraded. 

4
 

Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

There are several reasons for us to believe the next 

downgrade cycle will be more challenging for HG investors 

than prior ones (for non-Financials)

The charts below show that the upgrade/downgrade outcome from BBB- is quite 

variable over longer time periods and there are reasons for us to believe the coming 

cycle (whenever it is) will be more negative than the 30yr average. 

First, BBB- debt is a larger part of the HG bond index. Second, corporate leverage is 

higher now than it has been in many years. Across most rating buckets leverage 

levels are higher than in prior periods, not just the low rated ones. Third, the period 

of very low funding costs for corporates appears to be over with higher sovereign 

yields globally, driven in part by less QE and higher US government borrowing 

needs. Fourth, the size of the BBB market has grown much faster than the BB market 

(over the past 4 years, BBB debt in the JULI index has grown by $729bn (+42%) to 

$2.5tn, while the BB market has grown by $94bn (+19%) to $579bn. This makes it 

more difficult for the HY market to absorb newly downgraded bonds. The large 

capital structures of some of these issuers is another factor in this view. Fifth, the 

growth in overseas holdings of HG bonds, especially in Asia, where we believe there 

is significant sensitivity to ratings, and the small but growing share of the market in 

passive strategies both point to the potential for more rapid selling of newly 

downgraded HY bonds than in the past. 

Exhibit 4: The BBB market has outgrown the BB market by 2.2x over Exhibit 5: Foreign ownership of foreign bonds has grown 

the last four years, and 3.0x in the past 10 years significantly over the past few years

Source: J.P. Morgan, Moody’s, S&P, Federal Reserve as of 4Q2017

0

500

1,000

1,500

2,000

2,500

3,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

BBB Outstanding Debt BB Outstanding Debt

$bn

0%

5%

10%

15%

20%

25%

30%

35% 2011Q4 2015Q4 2017Q4

Technology disruption may be a greater risk to companies now than it has 

historically, driven by advances in technology in large HG sectors (Healthcare, 

Autos, TMT). There continues to be significant capital available to up and coming 

innovators who aim to disrupt traditional incumbents in an industry. These 

incumbents tend to have more debt than the disruptors so the net is negative for the 

credit profile of the industry in these situations. 

An offset to this view is the rating agencies were aggressive in downgrading the 

Energy sector in 2016, partly under the view that oil prices would stay consistently 

low as they were back then. This has, so far, proven incorrect with the recent oil 

price rebound. This suggests a possibility that the commodity complex is going to 

see rating upgrades in the coming years.

Finally our view of a more damaging downgrade cycle in the next recession does not 

apply to Financials. Banks are significantly better capitalized and more highly 

5
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

regulated than in prior periods. The growth in leverage occurring in non-Financials 

has not been happening in banks due to the regulatory framework now in place, and 

the lessons learned from the financial crisis. 

6
- -

Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

Sector concentration – Energy and Healthcare have driven 

the growth in BBB- rated bonds

The growth of BBB- rated bonds by sector over the past four years is

concentrated in Energy and Healthcare. The energy downgrades have obviously 

been driven by the volatility in commodity prices. Healthcare downgrades have been 

driven, in part, by M&A in the sector. Technology has had a significant increase in 

BBB- rated debt in percentage terms as has Real Estate, but not in absolute terms. 

Only 3 sectors have a higher share of BBB- debt than their overall index weight. 

These are Energy (26% vs an index weight of 12%), Healthcare (16% vs 14%) and 

Basic Industries (8% vs 5%). If one were looking for which sector may lead the 

charge downward in the next cycle this data alone suggests it is either Healthcare or 

Energy, and current market trends suggest it isn’t Energy.

Exhibit 6: BBB- debt has grown substantially, driven by Energy and Healthcare

160 BBB 148 - debt in JULI Non-Fins ex EM by sector $bn

140 2013 2017

120

92 100

80 6365 61

60 43 44 40 35 3537 36 29 40 23 25 26

15 18 14 11 13 20 12 13 11 5 0

0

Source: J.P. Morgan, Moody’s, S&P

Exhibit 7: BBB- debt in Energy and Healthcare has more than doubled in the last 4 years

Sector 2013 2017

Δ in 4y rs 2017 Share of 2017 Share of 

$mn % BBB- Debt JULI Debt

Energy 61,283 147,743 86,460 141% 26% 12%

Healthcare 35,647 92,216 56,569 159% 16% 14%

Consumer 62,752 64,515 1,763 3% 11% 12%

Basic Ind 40,105 43,820 3,715 9% 8% 5%

Tech 13,212 42,968 29,756 225% 7% 12%

Auto 35,254 36,548 1,294 4% 6% 4%

Telecoms 11,036 34,642 23,606 214% 6% 7%

Real Estate 11,175 26,150 14,975 134% 5% 4%

Utilities 29,222 25,419 -3,802 -13% 4% 10%

Media/Ent 350 23,095 22,745 6499% 4% 5%

Cap Goods 5,200 13,675 8,475 163% 2% 7%

Retail 18,235 13,046 -5,189 -28% 2% 5%

Transport 14,879 11,537 -3,342 -22% 2% 3%

JULI Non-Fins ex EM 338,349 575,373 237,023 70% 100% 100%

JULI Fins ex EM 82,909 142,725 59,816 72% - -

JULI Ov erall ex EM 421,258 718,098 296,840 70%

Source: J.P. Morgan, Moody’s, S&P

7
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

Expanding the analysis to a longer time period – expect 

significant downgrade activity in the next cycle, and there 

are reasons to believe this will be more disruptive than in 

prior cycles

The analysis below considers only Moody’s ratings and includes all corporate bonds 

globally, not just JULI non-Financial constituents as used above. This data goes 

back 30yr so it encompasses several economic cycles. The charts below highlight 

the variability in rating trends at different times. Note that the rating change figures 

discussed in this section focus on the number of issuers rather than the amount of 

debt, which is the approach we used above. 

2017 actually saw the lowest rate of BBB- bonds downgraded to HY in 30yrs. 

Just 4% of BBB- rated bonds at YE16 were rated HY at YE17. The average for this 

figure over the past 30yrs has been 11% and the peak was 23% in 2002. 

This positive trend for BBB- bonds in 2017 compares to a very negative trend in 

2016 though, highlighting how quickly these trends can and do change. In 2016, 

18% of BBB- issuers in this data set at the beginning of 2016 were rated HY by the 

end of 2016, and only 8% were upgraded above BBB- during that year. For the four 

years before 2016 the upgrade vs downgrade trend for BBB- issuers was positive 

again, averaging 12% upgrades vs 8% downgrades one year later. 

The 30yr history of the 1yr upgrade/downgrade trend shows significant 

volatility, with the peak good year being 1996 when 27% of BBB- bonds were 

upgraded vs 9% downgraded. The worst year by this metric was 2002 when 3% 

were upgraded vs 23% downgraded. On average, the trend in the one-year rate 

change is positive, with 13% of issuers upgraded and 11% downgraded.

Furthermore, the risk of downgrade to HY over one year is about 3.2x larger 

for BBB- issuers than for BBB flat issuers, on average since 1987. In 2017, 4% of 

issuers rated BBB- at the beginning of the year were rated HY by the end of the year 

while only 1% of BBB flat issuers were downgraded by at least two notches. The 

ratio between the BBB- Fallen Angel rate vs the BBB flat Fallen Angel rate is 

relatively stable over time. It was 3.5x in 2016 (18% for BBB- vs 5% for BBB flat) 

and about 3.7x on average over the last five years.

Exhibit 8: One-year rating changes for BBB- issuers are volatile and Exhibit 9: The risk of downgrade to HY over one-year has been 

clearly correlated with the economic cycle about 3x larger for BBB- issuers than for BBB flat issuers

Recession BBB- BBB

30% Upgrade Downgrade to HY Difference 25%

20% 20%

10% 15%

0% 10%

-10% 5%

-20% 0%

1987 1992 1997 2002 2007 2012 2017

-30%

1987 1992 1997 2002 2007 2012 2017

Source: J.P. Morgan, Moody’s

8
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

A review of the 3yr trends shows less volatility and a more pronounced 

correlation with the economic cycle. On average over the last 30 years, 27% of the 

issuers rated BBB- at the beginning of a year were downgraded to HY within the 

following three years. The same amount ended the two-year period with a higher 

rating. The most recent data, which looks at issuers rated BBB- at the beginning of 

2015, is more negative because of the commodities crisis in 2015-16: 28% of BBBissuers were downgraded to HY between 2015 and the end of 2017, while 23% were 

rated BBB flat or above at the end of 2017. This -6% net rate is the most negative 

since 2008.

The chart below shows that the worst three-year period started in 2001, with 43% of 

downgrades vs 14% of upgrades. The best period started in 1995, with 41% of 

upgrades vs 15% of downgrades. Again, the correlation with the economic cycle is 

quite clear.

The difference between the BBB- and BBB flat Fallen Angel risk discussed 

above for a 1yr period is also seen over 3yr periods: the ratio of the BBB- and 

BBB flat Fallen Angel rates is 2.4x since 1987 (27% for BBB- vs 11% for BBB flat). 

The most recent 3-year period is in line with the long-term average, with 11% of 

Fallen Angels for BBB flat issuers and 28% for BBB- issuers. 

Exhibit 10: Three-year rating changes for BBB- issuers are clearly Exhibit 11: The risk of downgrade to HY over three years is about 

correlated with the economic cycle. The most recent period has a 2.5x larger for BBB- issuers than for BBB flat issuers

negative net rate due to the 2015-2016 commodities crisis. 

60%

40%

20%

0%

-20%

-40%

-60%

BBB- BBB

40%

30%

20%

10%

0%

Upgrade Downgrade to HY Difference 50%

1987 1992 1997 2002 2007 2012 2017 1987 1992 1997 2002 2007 2012 2017

Source: J.P. Morgan, Moody’s

Over 5yrs and 10yrs 37%, and 53% of BBB- companies will be downgraded to 

HY and just 33% and 25% will be upgrade above BBB-, based on historical 

precedent. The data indicates that the net upgrade/downgrade rate becomes negative 

after three years. The most recent 5yr and 10yr periods are about in line with the 

longer historical average. Furthermore, note that there is only one net positive 10yrperiod since 1987, from the beginning of 1992 to the end of 2001. 

Finally, the Fallen Angel rates for BBB- and BBB flat issuers tend to converge over 

time, with the 5yr rates at 37% and 18%, respectively, i.e. a ratio of 2.1x, and the 

10yr rates at 53% and 33%, respectively, i.e. a ratio of 1.6x.

9
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

Exhibit 12: Historical Fallen Angel rate for BBB- issuers over different time spans

BBB- Downgrades

1-year 2-year 3-year 5-year 10-year

Average 11% 20% 27% 37% 53%

Min 4% 12% 15% 23% 43%

Max 23% 34% 43% 53% 62%

Median 11% 20% 27% 36% 52%

Most recent 4% 21% 28% 35% 52%

Source: J.P. Morgan, Moody’s

Exhibit 13: Historical upgrades rate for BBB- issuers over different time spans

BBB- Upgrades

1-year 2-year 3-year 5-year 10-year

Average 13% 22% 27% 33% 35%

Min 3% 8% 14% 21% 27%

Max 27% 38% 41% 48% 45%

Median 13% 21% 27% 32% 35%

Most recent 12% 16% 23% 29% 31%

Source: J.P. Morgan, Moody’s

Exhibit 14: Historical net rate of upgrade/downgrade rate for BBB- issuers over different time 

spans

BBB- net upgrades/downgrades

1-year 2-year 3-year 5-year 10-year

Average 2% 1% 0% -4% -18%

Min -20% -26% -29% -30% -35%

Max 18% 25% 26% 25% 2%

Median 2% 1% 0% -4% -18%

Most recent 7% -5% -6% -6% -21%

Source: J.P. Morgan, Moody’s

Exhibit 15: Historical Fallen Angel rate for BBB flat issuers over different time spans

BBB flat Downgrades to HY

1-year 2-year 3-year 5-year 10-year

Average 4% 7% 11% 18% 33%

Min 0% 1% 3% 7% 21%

Max 10% 18% 24% 31% 42%

Median 3% 6% 9% 16% 32%

Most recent 1% 6% 11% 14% 30%

Source: J.P. Morgan, Moody’s

10
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

Appendix: Largest issuers and changes

Exhibit 16: Largest BBB- issuers at YE17

Issuer Sector Debt ($bn) % of overall

General Motors Automotive 35.8 6%

Kinder Morgan Energy 29.2 5%

Energy Transfer Partners LP Energy 23.7 4%

Abbott Laboratories Healthcare/Pharma 23.3 4%

Allergan Healthcare/Pharma 22.2 4%

Kraft Heinz Foods Co Consumer 20.4 4%

Dell International LLC / EMC Corp Technology 20 3%

Shire Healthcare/Pharma 16.3 3%

Sabine Pass Liquefaction LLC Energy 12.8 2%

Williams Partners LP Energy 12.8 2%

Source: J.P. Morgan, Moody’s, S&P

Exhibit 17: Largest changes for BBB- universe in 2017

Issuer Amt ($bn) From HG/HY Category Sector

Joiners

General Motors Financial Co Inc 25.8 Upgrade Other Automotive

Sabine Pass Liquefaction LLC 12.8 Upgrade Commodity Energy

General Motors Co 10.0 Upgrade Other Automotive

AerCap Ireland Capital DAC 8.4 Upgrade Other Transportation

Abbott Laboratories 8.2 Downgrade/Existing Other Healthcare/Pharma

Leavers

Reynolds American Inc -11.4 Upgrade Other Consumer

Plains All American Pipeline LP -9.7 Upgrade Commodity Energy

Fidelity National Information Services Inc -8.7 Upgrade Other Technology

Glencore Funding LLC -5.5 Upgrade Commodity Metals/Mining

Pernod Ricard SA -4.8 Upgrade Other Consumer

Source: J.P. Morgan, Moody’s, S&P

Exhibit 18: Largest changes for BBB- universe in 2016

Issuer Amt ($bn) From HG/HY Category Sector

Joiners

Dell International LLC / EMC Corp 20.0 Upgrade/New M&A Technology

Abbott Laboratories 15.1 Downgrade/New M&A Healthcare/Pharma

Shire Acquisitions Investments 12.1 New M&A Healthcare/Pharma

Plains All American Pipeline LP 9.7 Downgrade Commodity Energy

Telefonica Emisiones SAU 7.9 Downgrade Other Telecoms

Leavers

Ford Motor Credit Co LLC -29.5 Upgrade Other Automotive

Freeport-McMoRan Inc -12.0 Downgrade Commodity Metals/Mining

Thermo Fisher Scientific Inc -7.4 Upgrade Other Healthcare/Pharma

Penske Truck Leasing Co Lp -6.4 Upgrade Other Transportation

Anglo American Capital PLC -5.2 Downgrade Commodity Metals/Mining

Source: J.P. Morgan, Moody’s, S&P

11
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

Exhibit 19: Largest changes for BBB- universe in 2015

Issuer Amt ($bn) From HG/HY Category Sector

Joiners

Kraft Heinz Foods Co 19.9 Downgrade M&A Consumer

Allergan Funding SCS 19.5 Same M&A Healthcare/Pharma

Williams Partners LP 11.4 Downgrade Commodity Energy

Viacom Inc 11.3 Downgrade Other Media/Entertainment

Reynolds American Inc 11.2 Same M&A Consumer

Leavers

Mondelez International Inc -10.1

Anadarko Petroleum Corp -8.7

Transocean Inc -7.5

Express Scripts Holding Co -7.0

Weatherford International Ltd -5.7

Upgrade

Upgrade

Downgrade

Upgrade

Downgrade

Other

Commodity

Commodity

Other H

Commodity

Consumer

Energy

Energy

ealthcare/Pharma

Energy

Source: J.P. Morgan, Moody’s, S&P

Exhibit 20: Largest changes for BBB- universe in 2014

Issuer Amt ($bn) From HG/HY Category Sector

Joiners

Kinder Morgan Energy Partners LP 19.5 Downgrade Commodity Energy

Kinder Morgan Inc 10.7 Upgrade Commodity Energy

Thermo Fisher Scientific Inc 9.6 Downgrade M&A Healthcare/Pharma

Tyson Foods Inc 3.9 Same M&A Consumer

Allergan Funding SCS 3.7 Upgrade Other Healthcare/Pharma

Leavers

International Paper Co -6.1 Upgrade Other Basic Industries

Waste Management Inc -5.1 Upgrade Other Consumer

Macy's Retail Holdings Inc -4.9 Upgrade Other Retail

Oncor Electric Delivery Co LLC -4.8 Upgrade Other Utilities

LyondellBasell Industries NV -4.0 Upgrade Other Basic Industries

Source: J.P. Morgan, Moody’s, S&P

12
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

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KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or 

intervention.

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designation is not a rating or a recommendation.

For CDS, we use the following rating system: Long Risk (over the next three months, the credit return on the recommended position is 

expected to exceed the relevant index, sector or benchmark); Neutral (over the next three months, the credit return on the recommended 

position is expected to match the relevant index, sector or benchmark); and Short Risk (over the next three months, the credit return on the 

recommended position is expected to underperform the relevant index, sector or benchmark).

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J.P. Morgan Credit Research Ratings Distribution, as of April 02, 2018

Overweight Neutral Underweight

Global Credit Research Universe 27% 56% 17%

IB clients* 65% 65% 60%

Note: The Credit Research Rating Distribution is at the issuer level. Please note that issuers with an NR or an NC designation are not included in the 

table above.

*Percentage of investment banking clients in each rating category.

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Other Disclosures 

13
QIB Only

Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

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14
#$J&098$#*P

Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

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Copyright 2018 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or 

redistributed without the written consent of J.P. Morgan. 

15
Eric Beinstein North America Credit Research

(1-212) 834-4211 11 May 2018

eric.beinstein@jpmorgan.com

US Economic Calendar

Monday Tuesday Wednesday Thursday Friday

14 May 15 May 16 May 17 May 18 May

Cleveland Fed President Mester 

speaks in France (2:45am)

Retail sales (8:30am)

Apr

Empire State survey (8:30am)

May

Business inventories (10:00am)

Mar

NAHB survey (10:00am)

May

TIC data (4:00pm)

Mar

Housing starts (8:30am)

Apr

Business leaders survey

(8:30am)

May

Industrial production (9:15am)

Apr

Atlanta Fed President Bostic speaks 

(8:30am)

Initial claims (8:30am)

w/e May 12

Philadelphia Fed manufacturing

(8:30am)

May

Leading indicators (10:00am)

Apr

Announce 2-year FRN (r) $16bn

Announce 2-year note $33bn

Announce 5-year note $36bn

Announce 7-year note $30bn

Auction 10-year TIPS (r) $11bn

Minneapolis Fed President Kashkari 

speaks (10:45am)

QSS (8:30am)

1Q advance

21 May 22 May 23 May 24 May 25 May

Minneapolis Fed President Kashkari 

speaks (6:30pm)

Philadelphia Fed 

nonmanufacturing (8:30am)

May

Richmond Fed survey

(10:00am)

May

Auction 2-year note $33bn

Manufacturing PMI (9:45am)

May flash

Services PMI (9:45am)

May flash

New home sales (10:00am)

Apr

Auction 2-year FRN (r) $16bn

Auction 5-year note $36bn

FOMC minutes

Initial claims (8:30am)

w/e May 19

FHFA HPI (9:00am)

Mar, 1Q

Existing home sales (10:00am)

Apr

KC Fed survey (11:00am)

May

Auction 7-year note $30bn

Durable goods (8:30am)

Apr

Consumer sentiment (10:00am)

May final

Fed Chair Powell speaks at Riksbank 

conference (9:00am)

28 May 29 May 30 May 31 May 1 Jun

Memorial Day, markets closed S&P/Case-Shiller HPI (9:00am)

Mar

Consumer confidence

(10:00am)

May

Dallas Fed manufacturing

(10:30am)

May

ADP employment (8:15am)

Apr

Advance economic indicators

(8:30am)

Apr

Real GDP (8:30am)

1Q second

Dallas Fed services (10:30am)

May

Beige book (2:00pm)

Initial claims (8:30am)

w/e May 26

Personal income (8:30am)

Apr

Chicago PMI (9:45am)

May

Pending home sales (10:00am)

Apr

Employment (8:30am)

May

Manufacturing PMI (9:45am)

May final

ISM manufacturing (10:00am)

May

Construction spending

(10:00am)

Apr

Light vehicle sales

May

4 Jun 5 Jun 6 Jun 7 Jun 8 Jun

Factory orders (10:00am)

Apr

Services PMI (9:45am)

May final

ISM nonmanufacturing

(10:00am)

May

JOLTS (10:00am)

Apr

QFR (10:00am)

1Q

International trade (8:30am)

Apr

Productivity and costs (8:30am)

1Q final

Initial claims (8:30am)

w/e Jun 2

QSS (10:00am)

1Q final

Consumer credit (3:00pm)

Apr

Announce 10-year note (r) $22bn

Announce 30-year bond (r) $14bn

Announce 3-year note $32bn

Wholesale trade (10:00am)

Apr

Source: Private and public agencies and J.P. Morgan. Further details available upon request. Times shown are EDT.

16