News Digest:

U.S. corporate bond spreads have widened to their highest levels in six months, signaling rising investor concerns about a potential recession and global trade tensions. Investment-grade bond spreads reached 94 basis points, while junk bond spreads hit 322 basis points, both at their widest levels since September, according to the ICE BofA indices.

Corporate bond spreads, which measure the difference between corporate and U.S. Treasury yields, are a key indicator of financial market stress. A widening gap suggests investors are becoming more risk-averse, particularly toward lower-rated “junk” bonds. The recent spread expansion follows escalating trade tariffs imposed by the Trump administration, heightening fears of a trade war and inflationary pressures.

Reuters quotes Andrzej Skiba of RBC GAM, citing that persistent inflation may prevent the Federal Reserve from cutting interest rates, increasing pressure on fixed-income assets. Societe Generale analysts noted that rising trade tensions and falling tech sector valuations are fueling market uncertainty.

JPMorgan analysts highlighted that junk bond spreads have widened by 59 basis points since mid-February and are expected to rise further due to economic uncertainty. While corporate bond spreads remain historically tight, they could continue expanding as the economic impact of tariffs and inflation becomes clearer. If spreads continue to rise, it could indicate a deeper economic slowdown ahead.

End Notes

Source: https://www.reuters.com/markets/rates-bonds/us-corporate-bond-spreads-hit-widest-about-6-months-recession-fears-2025-03-12/