Even though there has not been any progress toward a resolution of the trade disputes with China and two oil cargo ships were attacked near the Strait of Hormuz, investors were willing to bid up the price of risk assets. In the corporate bond market, there was a healthy amount of new issues priced as corporations looked to take advantage of the combination of the lowest interest rates in years and strong demand for corporate bonds. As an example, according to Commercial Mortgage Alert, there were $5.4 billion of new issues priced from issuers in the REIT sector, a new weekly dollar volume record. Chris Wimmer, Morningstar Credit Ratings’ vice president covering REITs, noted that “These companies either have a need for term financing sooner rather than later, or they have been active in investing and maybe development, have been putting it on their revolvers, and decided that because of the good execution they are getting today, now was the more certain time.”
Even though new supply helped satiate a significant amount of the investor demand, corporate credit spreads tightened across the markets. The average credit spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade corporate bond market) tightened 1 basis point to +130 and in the high-yield market, the ICE BofAML High Yield Master II Index tightened 14 basis points to +423. In the equity market, the S&P 500 rose 0.47% and is currently only 2% lower than its all-time closing high.