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Quarter-End Insights

Credit Outlook: Sector Updates and Top Bond Picks

Get our sector-by-sector take on the bond market, plus our five best bond ideas.

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Banks
Since the second quarter of 2012, we have opined that credit spreads for U.S. banks would outperform the broad corporate market. This opinion was based on our forecast that the credit metrics for U.S. banks would continue to improve over the course of the year, but the credit spreads for banks were trading wider than equivalently rated industrials. We held this view over the past three quarters, and our outlook proved to be correct, as U.S. banks did outperform over that time period. For example, on March 29, 2012, Morningstar’s Financial Corporate Bond Index was 70 basis points wide of the Morningstar Industrial Corporate Bond Index, where it currently is just 6 basis points wide.

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David Sekera has a position in the following securities mentioned above: EIX. Find out about Morningstar’s editorial policies.