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Long duration credit update for the first quarter of 2019
Greg Garrett
Fixed Income Investment Director

After a significant widening of spreads in the fourth quarter, credit markets rebounded along with equities and other risk assets during the first quarter. A key catalyst of positive sentiment was a more accommodative stance from the U.S. Federal Reserve. This drove U.S. Treasury yields lower across the yield curve and pushed the 10-year Treasury rate below the fed funds rate – a condition that has preceded each of the last three recessions by one to three years. Long-dated investment-grade credit spreads narrowed by 27 basis points (bps) to 173bps during the quarter. The spread tightening combined with lower Treasury yields cut the long corporate credit yield to 4.41% from 4.91%.


Option adjusted spread and yield to worst calculated for the Bloomberg Barclays Long U.S. Corporate Index as of March 31, 2019. Sources: Barclays, Bloomberg Index Services Ltd., Thomson Reuters Datastream.


Greg Garrett is Investment Director for credit and long duration strategies at Capital Group. He has 32 years of investment industry experience and has been with Capital Group for 18 years. He holds a bachelor’s degree in finance from the University of Arizona.


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