Are Credit Spreads Recent Tightening a Sign of a Trend?
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
Municipal Bond Index
Let's hope it is a trend.