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Credit Insights

Snapback Starts to Run Out of Steam

The Morningstar Corporate Bond Index tightened 5 basis points last week.

The snapback in the corporate bond market that began in early January has begun to run out of steam. In the investment-grade corporate bond market, the average spread of the Morningstar Corporate Bond Index tightened 5 basis points to +135. In the high-yield market, the average credit spread of the ICE BofAML High Yield Master Index widened 7 basis points to +434. Since hitting their widest levels earlier this month, investment-grade credit spreads have tightened 27 basis points and high-yield spreads have tightened 110 basis points.

REITs: Takeaway From the 2019 Private Placement Investment Forum
On Jan. 24, Chris Wimmer, Morningstar Credit Ratings' head of real estate investment trust research, moderated a panel of experts from the REIT industry at the Private Placement Investment Forum. Although property-level cash flows are still increasing, the rate of increase has slowed from the pace that has prevailed since the 2009-10 real estate downturn. However, participants on this panel generally believed that REITs with high-quality portfolios and robust balance sheets will continue to operate successfully, despite the expectation that the real estate cycle may be approaching its peak. Panelists agreed that credit profiles are in better shape than they were before the financial crisis of 2007-08, especially for public investment-grade REITs.

Weekly High-Yield Fund Flows
After hitting a 52-week high the prior week, high-yield fund flows paused last week as investors withdrew $0.3 billion from the high-yield asset class. Outflows were concentrated among the high-yield exchange-traded funds, which registered net unit redemptions of $0.3 billion. Fund flows across the high-yield open-end mutual funds were essentially unchanged.

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