Risk assets remained in vogue last week as investors bid up prices seemingly across the board on stocks and corporate bonds and sold off risk-free U.S. Treasuries and other sovereign bonds. Among economic indicators, fourth-quarter GDP increased 2.6%, missing consensus expectations, but the stock market continued to rise, hitting new highs, and credit spreads in the corporate bond market tightened. The main focus among corporate bonds was trading action in the secondary market. Following the flood of new issues from the banking sector two weeks ago, the new issue market dried up last week as few issuers looked to tap the capital markets.
The average spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) tightened 2 basis points and ended the week at +91, its lowest level since before the global financial credit crisis. Year to date, the average credit spread of the overall investment-grade index has tightened 5 basis points. In the high-yield market, the BofA Merrill Lynch High Yield Master Index tightened 12 basis points to end the week at +323, which is already 40 basis points tighter than at the end of 2017. This is the tightest level the high-yield index has registered since before the global financial credit crisis. The tightest that the investment-grade index has ever registered was +80, and the tightest the high-yield index has ever registered was +241, both in June 2007. Among other risk assets, the S&P 500 rose 2.23% last week and is already up 7.45% over the past 19 trading days thus far this year. After slipping the prior week, oil prices regained their momentum and rose $2.67 to end the week at $66.19 a barrel; they have risen $6.35 this year to their highest level since December 2014.