Corporate Bond Spreads Keep Widening as Investors Yank Cash
Comment of the Day

December 28 2018

Commentary by Eoin Treacy

Corporate Bond Spreads Keep Widening as Investors Yank Cash

This note by Christopher DeReza for Bloomberg may be of interest to subscribers. Here ii is in full:

U.S. credit spreads widened to the highest levels since the summer of 2016 as funds saw outflows even as major American equity indexes posted a second day of gains.

Investment-grade bond spreads widened 2 basis points to 152 basis points on Thursday. The index has widened every day since Dec. 14 and most trading sessions this quarter

The junk bond index also rose Thursday, although the move was less pronounced. The index widened 1 basis point to 531 basis points, the highest level since Aug. 4, 2016. It’s risen 113 basis points this month

Investment-grade funds saw outflows of $4.4 billion for the week ended Dec. 26, the most since December 2015, according to Lipper. Junk bond funds registered the biggest outflows since October.

Eoin Treacy's view

The stock market is short-term oversold and we have evidence of a short covering rally that began on the 26th. However, credit markets have not been the subject of bargain hunting and spreads continue to widen.

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