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Credit Insights

Corporate Bond Buyers Are in Control and in No Hurry to Buy

Fed remains on hold; waiting for stronger economic signals.

Trading action in the corporate bond markets continued to be soft last week. For most of the week, trading was very illiquid with glimpses of hope that trading action was improving, only for the resurgence in trading activity to be fleeting. There was still some activity in single A and BBB 5-year and high-quality 30-year paper, but both the short-term and 10-year parts of the curve struggled to find buyers. While it's not quite a buyers' strike, traders reported that buyers were in control and felt no urgency to put cash to work. Over the course of the week, spreads were weaker more often than not, and the average spread of the Morningstar Corporate Bond Index widened 4 basis points to end the week at +147. In the high-yield space, the average spread of the Bank of America Merrill Lynch High Yield Index widened 10 basis points to +473.