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Credit Insights

Markets Rally When Europe's Quiet

As investors focus on individual credit quality, they like what they see.

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Earnings season is beginning and analysts are switching their attention to earnings reports, but the demand for corporate bonds continues to drive the market higher.

We have highlighted since the beginning of October that credit spreads are cheap compared with our view of the underlying fundamentals. Considering that the news flow of dire headlines proclaiming systemic risk and collapse coming from Europe have died down since the December EU summit, investors have been able to focus on fundamentals. As investors focus on individual credit quality, they like what they see. The Morningstar corporate bond index tightened 8 basis points last week to +230, and it has tightened 20 basis points since the beginning of the year.

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