Rise in high yield credit spreads threatens recession
A rising spread indicates disfavor toward junk bonds (oh so favored during speculative risk ‘on’ phases) and this behavior can eventually either grind its way toward economic recession or spike its way there (ref. 2020).
Here is a longer-term view. Whether it grinds (2000) or spikes (2008 & 2020) a continued rise would eventually be a recession signal. As you can see, events similar to or worse than today occurred in 2011 and 2016 to no lasting ill effect. But if the spread takes out 7.5% it’s going to get hairy.
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btw, euro spreads look even worse, already exceeding 2016 heights. https://fred.stlouisfed.org/series/BAMLHE00EHYIOAS
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