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Quarter-End Insights

Credit Outlook: Sector Updates and Top Bond Picks

Get our sector-by-sector take on the bond markets, plus our five best bond ideas.

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Credit Sector Roundup
For large U.S. banks, the possibility of a European financial crisis due to European sovereign debt problems has been an overriding theme, as the market has been concerned about U.S banks' direct and indirect exposure to European banks. The European Central Bank's LTRO (Long-Term Refinancing Operation) program has helped alleviate many market fears of European bank failures by providing low-cost, three-year funding to European banks as needed. As a result, we have seen the credit spreads for large U.S banks tighten approximately 50 basis points over the last quarter. Although we see this action by the ECB as a short-term solution, which does not address the long-term solvency concerns of certain troubled European governments, it has dramatically lowered the probability of a near-term European financial crisis.

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