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Credit Insights

Financial Corporate Bonds Outperforming Industrials

The fact that credit spread tightening has been led by the financial sector has been a common theme throughout the year.

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The average credit spread in the Morningstar Corporate Bond Index tightened 4 basis points last week to +150. Once again, the financial sector outperformed, tightening 5 basis points as compared with 2 basis points in the industrial sector.

The lift in sentiment across the corporate bond market last week was driven by encouraging macroeconomic metrics that indicate the U.S. economy continues to expand. For example, the ISM Manufacturing Index rose back above 50 (the level that separates expansion and contraction) to 51.5 and the ISM Non-Manufacturing Index rose to 55.1. While there was a lot of noise in the employment situation reports, PMI Manufacturing Index, and factory orders, the underlying trends in each indicate an expanding economy.

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