Skip to Content
Credit Insights

First Pullback in Corporate Credit Spreads in 10 Weeks

We continue to view credit spreads as fairly valued, albeit at the tight end of the range that we see as appropriate, given our economic outlook.

Mentioned: , , , , , , , , ,

The average credit spread in the Morningstar Corporate Bond Index widened 5 basis points to +121 last week. This is the first time that our index has widened on a weekly basis since Nov. 8, some 10 weeks ago. While the basic materials sector weakened a little more than other sectors, credit spreads generally widened out across the board. We continue to view credit spreads as fairly valued, albeit at the tight end of the range that we see as appropriate, given our economic outlook. 

Other risk assets fell as well, as the S&P 500 fell 2.6% last week. The S&P attempted to hold its support at 1,800, but once that level was breeched, it was all downhill from there for the rest of the trading session Friday. The equity market's fear gauge, the VIX, soared 32% to 18.1, the highest since last October. As the markets sold off, the 10-year Treasury rose in a flight to safety, sending its yield down 9 basis points to 2.74%, its lowest since last November. Except for a few high-profile companies whose shares rose after reporting earnings, investors have been generally disenchanted with results. Top-line growth has remained sluggish, guidance has been lackluster at best, and a significant part of earnings growth has been low quality (tax changes, addbacks, or share buybacks) as opposed to sustainable improvements in the underlying business. Reporting season kicks up in earnest this week, as about 25% of the companies in the S&P 500 are scheduled to release earnings. 

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

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.