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Credit optimism

The bond market, and more specifically the #highyield market, is not pricing a recession. As you can see in the chart below, high yield spreads sit comfortably below 500 bps signaling perhaps that an economic soft landing is the path the US economy will follow. It’s ignoring the leading economic indicators, that are trending down, it’s ignoring the layoffs in the tech sector and the fact that corporate earnings are expected to come light for 2023. It’s also ignoring an inverted yield curve that’s showing the biggest inversion of the last 40 years. There needs to be a re rating in expectations.

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