Corporate Bonds Steady as Turkish Markets Stabilize
The lira regained some of its lost value against the dollar last week.
Performance across the asset markets diverged last week as the equity market continued its march higher, corporate bonds and Treasuries were largely unchanged, and commodity markets weakened. In the equity market, investor enthusiasm was supported by better-than-expected second-quarter results from Walmart (AA-, negative), whose stock price soared 9.3% after the earnings release and helped propel the S&P 500 up 0.6%. Year to date, the S&P 500 has gained a healthy 6.60%. The solid equity market performance has been driven by rising earnings and especially by strong top-line growth. Reported revenue for the second quarter has been generally strong across the board, and many companies have increased their guidance for 2018 to incorporate the resulting earnings growth.
In the corporate bond market, the average spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade market) was unchanged, ending the week at +116. In the high-yield market, the BofA Merrill Lynch High Yield Master Index tightened 1 basis point to end the week at +349. Among U.S. Treasuries, the 2-year widened 1 basis point to 2.61%, the 5-year was flat at 2.74%, and the 10-year and 30-year tightened by 1 basis point to 2.86% and 3.02%, respectively.