Dave Sekera: Over the course of this year, credit spreads across the corporate bond market have continued to tighten. In the investment-grade space, the Morningstar Corporate Bond Index has tightened approximately 10 basis points, and in the high-yield space, the Bank of America High Yield Master Index has tightened approximately 60 basis points. The current levels for both of these indices are at the tightest spread level since mid-2014. While current levels are still wider than their historical lows reached in 2007, after this rally, the current levels in the corporate bond markets are significantly tighter than their long-term averages.
As an indication of how tight corporate credit spreads have become as compared to their historical averages, since the beginning of 2000, the average spread of the Morningstar Corporate Bond Index has registered below the current level only about 25% of that time. In the high-yield market, the average spread of the Bank of America Merrill Lynch High Yield Master Index has registered below its current level less than 13% of the time over the past 17 years. The preponderance of that time of the index residing at those levels, that were tighter than the current credit spread, occurred between 2004 and 2007, during the buildup prior to the 2008-09 credit crisis.