Credit Rally Takes a Breather

The average credit spread within the Morningstar Eurobond Index is the tightest its been since the summer of 2011, but this trend may not continue

Dave Sekera, CFA 23 November, 2012 | 6:00AM

The average credit spread within the Morningstar Eurobond Index declined as low as +147 basis points on November 8th. This is the tightest credit spread the index has reached since June 2011. Since the beginning of the year, credit spreads have tightened an astounding 170 basis points and are approximately 60 basis points from the tightest levels reached in January 2010 since the 2008/9 credit crisis. Between tighter credit spreads and lower treasury yields, the Morningstar Eurobond Bond Index has returned an impressive 11.69% year-to-date. Considering German treasury rates continue to hover near historic lows and corporate credit spreads have significantly less room to tighten, we caution investors not to expect this type of return next year.

The Morningstar Eurobond Bond Index has returned an impressive 11.69% year-to-date ... we caution investors not to expect this type of return next year

 

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About Author

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

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