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Credit Insights

Bond Investors Key In on the Economy

Strong economic data and global stimulus hopes overcame weak corporate earnings in the bond market last week.

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The potent brew of stronger economic data in the United States and renewed hope for further central bank stimulus lifted the spirits of the global equity and credit markets last week, only to be dashed on Friday as weak earnings reports weighed on the markets. However, based on the strength earlier in the week, the average credit spread in the Morningstar Corporate Bond Index tightened 10 basis points last week to +133, approaching levels not seen since 2007.

The week brought a slew of positive economic data in the U.S., which emboldened buyers of risky assets to look past weak third-quarter results from companies such as Intel (INTC, AA), Google (GOOG, AA), Coca-Cola (KO, AA-), and IBM (IBM, AA-). Offsetting these marginal reports were bank earnings from J.P. Morgan Chase (JPM, A) and Wells Fargo (WFC, A+) that showed continued improvement in core businesses.

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