Credit Trends:

Spreads Remain Fairly Steady Amid Slumping Indices

Global Fixed Income Research: Diane Vazza, Managing Director, New York (1) 212-438-2760; diane.vazza@standardandpoors.com Gregg Moskowitz, Associate, New York (1) 212-438-1838; gregg.moskowitz@standardandpoors.com

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Global Fixed Income Premium Research Related Research

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Credit Trends:

Spreads Remain Fairly Steady Amid Slumping Indices

The S&P 500, Dow Jones Industrial Average, and Nasdaq indices all declined from Aug. 13-19 as investors grew concerned over when the Fed would begin to wind down its third round of quantitative easing (QE3). While the Nasdaq and S&P 500 indices eventually bucked the trend, closing higher on Aug. 20, the Dow Jones Industrial continued its decline. Over this one week period, the investment and speculative grade composite spreads have remained fairly steady. The investment grade spread has widened by 1 basis point (bp) to 183 bps and the speculative grade spread has expanded by 3 bps to 489 bps. Speculative-grade issuance decreased to $0.6 billion from $6 billion over the past week, and the spread tightened by 1 bp to 487 bps. The speculative-grade spread is tighter than both its one-year moving average of 539 bps and its five-year moving average of 733 bps. Investment-grade issuance decreased to $1.8 billion from $12 billion over the past week, and the spread widened by 1 bp to 183 bps. The investment-grade spread is tighter than its one-year moving average of 184 bps and its five-year moving average of 238 bps. The five-year maturity bond yields for the 'AAA', 'AA', 'A', 'BBB', and 'BB+' categories are 2.16, 2.34, 2.56, 3.31, and 4.56, respectively, for the past week. When expanding the maturity to 25 years, the yields grow to 4.77, 5.11, 5.23, 6.29, and 7.01, respectively.

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Credit Trends: Spreads Remain Fairly Steady Amid Slumping Indices

Chart 1

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Credit Trends: Spreads Remain Fairly Steady Amid Slumping Indices

Chart 2

Table 1

U.S. Corporate Bond Yields By Maturity (%)

Maturity (years) Five 10 15 20 25 AAA 2.16 3.65 4.06 4.43 4.77 AA 2.34 3.90 4.35 4.74 5.11 A 2.56 4.08 4.51 4.88 5.23 BBB 3.31 4.96 5.46 5.89 6.29 BB+ 4.56 5.99 6.36 6.69 7.01

Data as of Aug. 21, 2013. Source: Standard & Poor's Global Fixed Income Research.

Standard & Poor's Global Fixed Income Research provides U.S. option-adjusted spread composites consisting of more than 13,000 investment-grade and speculative-grade issues. Credit spreads are a measure of the market's valuation of credit risk and are quoted in bps (1/100th of a percentage point). They reflect daily movements in credit spread levels within various bond market sectors. The spreads are calculated daily above the U.S. Treasury yield curve for various bond market sectors, subsectors, rating categories, rating designations, outlooks, CreditWatch placements, and maturities. Issues included in the composite bond spread calculations have the following characteristics:

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Credit Trends: Spreads Remain Fairly Steady Amid Slumping Indices

Face amount outstanding of at least $100 million; U.S. dollar-denominated issues of companies domiciled within or outside the U.S.; Rated by Standard & Poor's Ratings Services; Issues may have embedded call, put, and sinking fund options; and Fixed-coupon bonds, excluding convertible, step-up, and preferred securities.

Global Fixed Income Premium Research

This article is part of Standard & Poor's Global Fixed Income Research content currently accessible on RatingsDirect. Additional exclusive content is accessible to subscribers who upgrade their RatingsDirect package to include the Global Fixed Income Research Add-On, including access to all of our full, comprehensive analyses, underlying data download capability, and quarterly webcasts. For more information, please contact SI_Marketing@standardandpoors.com or visit us on the web at www.standardandpoors.com/gfir.

Related Research
Credit Trends: U.S. Composite Credit Spreads Daily (Aug. 22, 2013), Aug. 22, 2013 Credit Trends: U.S. Credit Overview (Aug. 15 - 21, 2013) (Premium), Aug. 22, 2013 Credit Trends: Global Corporate Entities Issued Just Short Of $2 Trillion In New Bonds Through July 2013, Aug. 8, 2013

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