Corporate Credit Spreads Widen in Response to Rising Geopolitical Tensions
The flight to the safety of U.S. Treasury bonds pushed interest rates lower.
Corporate credit spreads widened from their recent lows as geopolitical tensions escalated last week. After bottoming out at +105 at the end of July, the average spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) widened 10 basis points to +115, with the preponderance of the widening occurring last week. Similarly, since hitting its recent lows at the end of July, the average credit spread of the BofA Merrill Lynch High Yield Master Index has widened 45 basis points to +400. The equity market experienced a rare pullback as the S&P 500 declined 1.43%.