Before the global financial crisis (GFC), credit cycles typically lasted between five to seven years (Exhibit 1). However, since the GFC, more frequent periods of sharp spread widening followed by spread compression have occurred — what we refer to as minicycles. With these shortened cycles, spreads tighten and widen within only a couple of years. While the catalyst in each minicycle has been different, the underlying conditions that allow for this volatility in spreads has been the same.
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