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Credit Insights

Credit Market Takes New Crisis in Stride

The sell-off in the credit markets following the Japan crisis was fairly orderly last week.

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The sell-off in the credit markets was fairly orderly last week. Credit spreads widened out, but traders were not indiscriminately hitting bids. Investors began to price in greater tail risk to those sectors that could be most adversely affected by the disaster in Japan, and we saw an increase in defensive posturing such as swapping into shorter-dated paper.

The market opened weak with Japanese auto manufacturers experiencing the brunt of the selling pressure, widening 30-40 basis points; however, those bonds regained some ground and ended the week 20-25 basis points wider.

David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.