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Quarter-End Insights

Credit Outlook: Sector Updates and Top Bond Picks

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Credit Sector Roundup
For nearly four months, the credit markets have been hit with wider spreads and increased volatility. No sector has been hit harder than the banks. While some of the concerns are due do a possible slowing economy and continued mortgage-related problems, the recent volatility appears also to have been driven by sovereign debt concerns out of Europe. It is hard to predict what will happen in Europe as there numerous outcomes for how the European sovereign debt situation will be resolved--from a disastrous contagious default and dissolution of the euro to a more benign support scenario where the European Central Bank can allow the governments to "muddle through" their problems. One thing is clear, however: The situation won't be resolved quickly, and credit spread volatility, especially for banks, will be with us for a while.

David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.