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Credit Insights

Corporate Credit Market Regains Some Ground

It appears that corporate bond investors are becoming more comfortable undertaking credit risk at these levels.

After hitting their tightest levels since the 2008-09 global credit crisis in late January and early February, corporate credit spreads have generally been on a widening trend as the threat of global trade wars heightened the market's perception of credit risk. However, after widening from those lows, corporate credit spreads regained some ground this past week. The average spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) tightened 3 basis points last week to +112. This is still 24 basis points wider than where the index bottomed out in early February and 15 basis points wider year to date. In the high-yield market, the BofA Merrill Lynch High Yield Master Index tightened 8 basis points last week; however, it remains 41 basis points wider than where it bottomed out in late January and is almost back up to the level it was at the end of last year. Although the S&P 500 fell 1.38% last week, it appears that corporate bond investors are becoming more comfortable undertaking credit risk at these levels.

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