Skip to Content
Credit Insights

Trading Activity Muted as Investors Await Earnings

Corporate bond trading activity was relatively light as many investors decided to wait for the calendar to build this week as reporting season ramps up.

Mentioned: , , , , ,

Although most on-the-run names felt relatively flat last week, the Morningstar Corporate Bond Index tightened 2 basis points to +116. The amount of new issues priced last week in the investment-grade segment was respectable; however, since most U.S.-domiciled issuers are in their quiet period before they release fourth-quarter earnings, a significant portion of those that tapped the market last week were Yankee issuers. Trading volume was relatively light as many investors decided to wait for the calendar to build this week as reporting season ramps up. According to several syndicate desks, many issuers are planning on quickly coming to market after their earnings release. In the high-yield market, we are hearing that it's become a food fight for investors to obtain bonds from new issue allocations, as some deals are reported to be a ridiculous 10-15 times oversubscribed. The demand for high yield has continued to increase as investors reach for yield, pushing the credit spread of the Bank of America Merrill Lynch High Yield Master Index down to +387, its lowest level over the past few years. Combined with low interest rates, the all-in yield for this index is currently a paltry 5.36%.

In the secondary market, trading activity appeared to be picking up for bonds issued by  Zions Bancorp (ZION) (rating: BBB-, narrow moat). Chris Baker, our bank sector credit analyst, published a note Thursday detailing why he thought the notes were attractive. While Zions' bonds are not for the faint of heart, Baker believes buyers of BBB bank paper should consider the 4.50% senior notes due March 27, 2017, which are indicated at 175 basis points above the nearest Treasury, or the Regions Bank 7.50% subordinated debt due in 2018, indicated at +161, as we believe these notes would be structurally senior to holding company debt in a Title II liquidation. Relative to where Zions' peers are trading and our view of the credit risk, we think both bonds are trading at attractive levels. 

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

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.