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  • Jonathan Poyer

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

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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