, Columnist
The Hidden Message in Credit Spreads
The credit market looks alarmingly tight given the outlook of rising interest rates and recession fears. But there are reasons for this.
Low private sector debt.
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The credit market is trying to tell us something. But what, exactly? Look at it almost any way, and credit is available at rates that imply no particular risk of default, and very little risk of recession. In both the euro zone and the US, high-yield bonds are looking misnamed. After a brief and sharp rise last year, their spreads over equivalent five-year government bonds are right back to a level that suggests all is quiet: