Bond Markets Continue to Lag Equities

Stronger-than-expected economic indicators in the US prompted investors to rethink when the Federal Reserve may begin to taper its asset-purchase program

Dave Sekera, CFA 12 November, 2013 | 11:01AM

This article originally appeared on Morningstar.com and so references to the bond market concern US corporate debt. The sentiment applies to global developed markets.

Stronger-than-expected economic indicators prompted investors to rethink when the Federal Reserve may begin to taper its asset-purchase program. While we doubt the Fed will begin to taper its asset purchases as soon as its December meeting, with these stronger reports the potential for the taper to begin sooner rather than later is certainly higher. After having suffered from the sharp sell-off in both interest rates and widening credit spreads this summer because of the expectation that the Fed was going to begin tapering in the fall, investors are once again hesitant to invest in longer-dated corporate bonds.

While the equity markets have been roaring ahead over the past few months, credit spreads are languishing. Since the beginning of August, the S&P 500 has risen 5%, whereas the average credit spread in our US corporate bond index has tightened only 5 basis points. In fact, since May 15, when our index hit its tightest level for the year at +129, the S&P 500 has risen 6.7%.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Dave Sekera, CFA  is a senior securities analyst with Morningstar.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies