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Credit Insights

Good Mood From Holidays Continues to Permeate

Buyers seemed to outnumber sellers in the credit market last week, especially for short-dated bonds.

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The good mood from the holidays continued to permeate through the credit markets last week as traders ignored rumblings out of Europe and credit spreads tightened five to six basis points. The Morningstar Corporate Bond Index tightened six basis points to +244.

It was a relatively calm week as investors concentrated their time searching for offers, as opposed to looking for bids. Many institutional investors reportedly were inundated with cash to put to work at the beginning of the New Year. According to one street trader, he thought there was approximately a 3/1 ratio of buyers to sellers. Short-dated bonds were in high demand as portfolio managers parked cash while they were more discriminate about putting money to work in longer-duration paper. The same bond trader saw a few smart money accounts selling some long duration paper to lock in recent gains, but there were not enough sellers to call it a trend. A few new issues were brought to market and performed well in the secondary market, but there was not enough paper to satiate investor demand. Syndicate desks were also quiet, leading us to believe that the forward calendar may not be as active for the next week or two as we originally anticipated.

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