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Credit Insights

Volatility Continues to Rule Markets

Despite the fact that company fundamentals remain supportive of spread levels, the impact of interest-rate and equity market moves was again felt in the corporate bond market.

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We continue to view the corporate bond market as fairly valued, but we believe the near-term direction of spreads will be positively correlated to interest-rate and equity market moves. 

Volatility continued last week as markets responded to data and central bank commentary. The positive tone set by the May payroll data carried over into last Monday, when Standard & Poor's raised its outlook on its U.S. credit rating to stable from negative. The encouraging economic data continued during the week as the NFIB Index of Small Business Optimism rose 2.3 points in May to 94.4, posting its second-highest level since the recession. Weekly jobless claims and retail sales for May both posted results that were in line with or better than expectations, though industrial production, capacity utilization, and consumer sentiment, which were all released Friday, were slightly softer-than-expected. 

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