Greek Stand-Off in the Credit Market
For spreads to tighten, the market must have definitive documentation on the next installment of Greece's bailout and a debt exchange agreement from Greek bondholders.
Credit markets appeared on hold last week, awaiting the terms and conditions of a Greek bailout (which was finally hammered out early this week). Accordingly, bonds ended the week roughly flat and didn't move much throughout the week.
The Morningstar Corporate Bond Index remained at around 200 basis points over Treasuries. The credit market is clearly more cautious than the equity market, as bailout chatter whipsawed stocks during the week, despite generally positive domestic economic indicators. On news Friday that a Greek bailout appeared more likely, the Dow and S&P 500 ended the week up more than 1% after being flat to down Tuesday and Wednesday, when the markets reported a snag in negotiations.
Joscelyn MacKay does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.