(Bloomberg) — Two of the fixed income securities that best portend economic strains — US junk bonds and the financial sector’s high-grade bonds — are rallying as the economy hums along. The trend may continue as fears of a recession subside.
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The average spread on US junk bonds has tightened by 24 basis points to 299 basis points so far this year, according to a Bloomberg index. That of high-grade financial bonds has also tightened by 16 basis points during the period, another Bloomberg index showed.
The rally in those spreads is likely to continue in 2024, according to revised credit forecasts by Goldman Sachs Group Inc. strategists. “We also think the continued improvement in macro volatility and low recession risk will likely continue to support a healthy market,” credit strategists including Lotfi Karoui wrote in a March 28 note.
The Wall Street bank’s outlook matches other sanguine notes from…
