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Credit Insights

Heavy New Issue Volume Pressures Corporate Bond Market

Credit spreads were unable to hold their ground last week.

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While credit spreads held in fairly well two weeks ago despite the record-breaking amount of weekly new issue volume, they were unable to hold their ground last week. New issue volume slowed from its torrid pace the prior week, but among the issuers we rate, still another healthy $24 billion worth of volume was priced last week. Between the volume, interest rates backing up, and weakness in the equity markets, the average spread of the Morningstar Corporate Bond Index widened 2 basis points to +110.

In the high-yield space, fund flows turned negative after four consecutive weeks of inflows. Among high-yield mutual funds and exchange-traded mutual funds, investors pulled $0.9 billion out of the asset class, reversing the prior two weeks' worth of inflows. The credit spread of the Bank of America Merrill Lynch High Yield Master II Index widened 11 basis points to +403 basis points.

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

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