Investment-Grade Credit Spreads Break Through 100 Basis Points
Risk assets continued their unrelenting trend higher last week.
Risk assets continued their unrelenting trend higher last week. Equity markets reached an all-time high, commodity prices generally trended upward, and compensation for underwriting corporate credit risk has tightened to its lowest level since the 2008-09 credit crisis. In the investment-grade market, the average spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) tightened 2 basis points to +99. This is the first time the index has registered inside +100 since before the 2008-09 credit crisis. The tightest the index has ever reached was +80 in February 2007. In the high-yield market, credit spreads have not yet hit new post-credit-crisis lows but are within 13 basis points of reaching their recent lows in June 2014. The BofA Merrill Lynch High Yield Master Index tightened 18 basis points to end the week at +342. The tightest the index has registered over the past 20 years was +241 in June 2007.