Rally Loses Steam, Credit Spreads Roll Over
Diverging global monetary policy: U.S. considers tightening whereas rest of world is easing.
After tightening for the past six weeks, corporate credit spreads backed off as equity markets dropped and commodity prices fell. The average spread of the Morningstar Corporate Bond Index widened a modest 2 basis points to +158 bps over Treasuries, whereas the Bank of America Merrill Lynch High Yield Master Index was hit hard, suffering 42 bps of widening to end the week at +624 bps. After five weeks of strong inflows, high-yield mutual funds and exchange-traded funds endured $1.8 billion of outflows as investors looked to reduce exposure to high-risk assets.
David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.