Amid the noise, credit spreads continue to rise

High Yield credit spread hits its highest level since December, 2020

A feature of a weakening economy, not mention strengthening risk ‘off’ behavior is rising High Yield credit spreads. Junk bonds are out of favor as investors come to value safer liquidity over speculation and yield.

high yield credit spreads

Here is the longer view showing the spread’s rise into both Armageddon ’08 and the 2020 COVID crash. There were three other disruptions, each of which followed a bump up in long-term interest rates (and to varying degrees, inflation), like we have now. Those occasions were limited affairs, but there is always the chance that the spread will forecast an economic contraction/recession if/as it continues rising.

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