The overall widening trend in the last year has not shown any sign of reversing.
The low spread cushion/low yield level combination remains. Issuance tapered a bit while net inflows increased.
U.S. Investment Grade Corporates: Reduced To Neutral, U.S. Municipal Bonds: Favorable, U.S. High Yield Corporate Bonds: Neutral
Record issuance and oil-related weakness combined to drive the spreads wider but we remain Favorable on these bonds for now.
High grade credit spreads were unchanged...Risk-on rally for high yield is getting to a mature stage...Tax advantage offered by munis make them attractive.
High grade credit spreads narrowed slightly, which served as a nice volatility dampener in the fast changing risk-on/risk-off environment.
Given the higher volatility and increased risk aversion, high grade credits are attractive as the negative relationship between rates and credit spreads dampens the volatility of this asset class.
The thin liquidity likely magnified the move in both rates and credit spreads, but we continue seeing a friendly macro environment that supports high quality credits.
The renewed participation of credits in the risk asset rally is a welcome sign.
We are encouraged by the narrower spreads in October as the feared divergence between credits and equity markets did not continue.