The Song Remains the Same

With continued bond fund inflows, little new issuance, and low dealer inventories, traders are scrounging to source bonds

Dave Sekera, CFA 16 October, 2012 | 4:23PM

The average credit spread in the Morningstar Corporate Bond Index tightened 3 basis points last week to +144. Since the beginning of June, credit spreads have steadily tightened about 4 basis points a week, with very little variability.

Last week, after lagging the tightening in the financial sector, the industrial sector finally outpaced the financials and tightened 4 basis points compared with the financials, which were largely unchanged.

However, year to date the key to outperformance has been to be overweight the financial sector, as the spread between financials and industrials has tightened 120 basis points to a 27-basis-point differential compared with its widest level of 148 basis points last December.

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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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Kohl's Corp23.97 USD3.77
RELX PLC1,635.00 GBX-0.09

About Author

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

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