Welcome to Thoughts on the market.

I'm Andrew Sheets, Chief Cross Asset Strategy for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives, I'll be talking about trends across the global investment landscape and how we put those

ideas together.

It's Friday, April 3rd at 2 p.m. in London.

For much the last three years we've had a negative underweight view on global credit markets. That view has now changed and I

wanted to take a moment to discuss why we've become more optimistic about credit even as economic

and public health data continue to get worse. Our negative view on credit was based on three factors.

First, valuations were expensive, with the extra yield on many types of global credit

near the low end of the historical range. Second, fundamentals appeared

shaky as borrowers had taken on large amounts of debt in recent years.

And third was our view on the economic cycle. Historically, credit is often at

greatest risk when one is late in an economic expansion, as indicated

by measures such as very low unemployment, very high consumer confidence, or a very flat

yield curve.

Until recently, we had all three.

But recently, each of these three concerns has shifted,

enough that we think credit markets now have a positive outlook.

The first change has been to valuations. In a span of just two months,

spreads on corporate and securitized credit have moved from some of their lowest levels

versus government bonds in the last decade to some of their highest.

Indeed, for investment-rated corporate bonds in the United States, we estimate that spreads have

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