The tightening and widening of credit spreads can really wreak havoc on income markets.
A credit spread is the difference in yield between a U.S. Treasury bond and another debt security of the same maturity but different credit quality.
What really drives widening/tightening: perception in the change of credit quality or liquidity.
So how have credit spreads looked this year:
Spread duration - moves due to spread widening and tightening - can be determined by the length of the security. The shorter the time frame to maturation, the less of potential impact on duration. Maybe some of the longer-term fixed income securities are starting to benefit from this recent tightening we have seen.
As of 8/11/2022 | 7-Day | 1-Month | 3-Month | 6-Month |
US Aggregate | -1.19% | 1.04% | 0.31% | -5.98% |
MBS Index | -0.92% | 1.66% | 1.12% | -4.43% |
Municipal Bond Index | -0.35% | 1.27% | 3.52% | -3.65% |
HYG | -0.25% | 5.47% | 3.19% | -4.84% |
LQD | -1.43% | 2.30% | 1.42% | -8.93% |
Let's hope it is a trend.
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