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Credit Insights

Corporate Credit Spreads Continue to Trade in Narrow Range

Slowing consumption, falling exports, weak energy sector lead to stagnant GDP growth.

Over the past few months, corporate credit spreads have traded in a relatively narrow range. Rising oil prices have driven credit spreads tighter in the energy sector, which has largely offset widening credit spreads in other sectors. The average spread of the Morningstar Corporate Bond Index widened 2 basis points to end the week at +132, the same level the index has averaged since the beginning of March. In the high-yield market, the Bank of America Merrill Lynch High Yield Index tightened 3 basis points to +453. Oil prices continued to recover, rising to a little over $59 a barrel from $57. As oil prices have generally risen since we noted that they had appeared to bottom out in the mid-$40s in our Jan. 12 publication, the energy sector has outperformed the rest of the corporate bond market. In the investment-grade market, the average spread of the energy sector in the Morningstar Corporate Bond Index tightened 8 basis points to +181, and in the high-yield sector, energy tightened 34 basis points to +642.