Investment-Grade Bonds Catch a Bid In July
A multitude of concerns kept investment-grade investors at bay in the first half.
After steadily widening out since hitting their tightest levels in February, investment-grade corporate bonds finally caught a bid in July. Since the end of June, the average spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade market) has tightened 8 basis points to +120. However, even after accounting for this rebound, the spread in the investment-grade market remains close to the widest levels it has traded at since the beginning of 2017.
In the high-yield market, since the end of June the average spread of the BofA Merrill Lynch High Yield Master Index has tightened 16 basis points to end last week at +359. While investment-grade spreads are not that far off their widest levels since the beginning of 2017, the high-yield market is trading near the midpoint of its range over the same period. The high-yield market has performed better year to date, as the average credit spread in the investment-grade bond market has widened 24 basis points whereas the average spread of the high-yield index has tightened 4 basis points.