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Credit Insights

Credit Spreads Grinding Tighter, Still Have Further to Go

So long as the Fed's asset-purchase program is running full speed ahead, it will provide a ceiling on how much long-term rates can rise and will help push credit spreads tighter over time.

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Corporate credit spreads continued their slow grind tighter as the average spread in the Morningstar Corporate Bond Index tightened 1 basis point to +134. Interest rates increased modestly as the yield on the 10-year Treasury bond rose 4 basis points to 2.75% and the S&P 500 rose 0.4%, reaching a new high of 1,804.

Economic data released last week was generally positive. Considering that economic data over the prior few weeks has been dour, director of economic analysis Robert Johnson said this week's data made him feel better about the overall economic outlook. Specifically, Johnson cited stronger retail sales reports and a rebound in Markit's Manufacturing Purchasing Managers' Index.

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