Investment grade credit spreads improved during the first quarter of 2017, with the option-adjusted spread on the Bloomberg Barclays Corporate Bond Index tightening 5 basis points (bps) to 118 over the three month period ending March 31, 2017. This compares to 163 bps at the end of 1Q2016. Significantly, however, credit spreads widened in March after tightening during both January and February. Moreover, the eight month credit spread compression trend came to an end during March as crossover credits (which still have a non-investment grade rating from one of the three major rating agencies) underperformed higher-rated credits for the first time since June 2016. U.S. Treasury performance was likewise muted, with the yield on the benchmark 10-year Treasury falling from 2.445% to 2.388% during the quarter.
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