High yield credit spreads continue to rise

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).

high yield credit spreads

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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