The credit spread for junk bonds, the premium companies pay over risk-free Treasuries, recently widened to the most in six months and could rise further as investors worry about how a global trade war could hurt the U.S. economy, investors and analysts said on Monday.
Last Thursday, U.S. junk bond spreads touched 340 basis points (bps), the widest spread since Sept. 11, 2024, according to the ICE BofA High Yield Bond Index. The spread hit a previous six-month high of 322 bps on March 11.
Investors generally use bond spreads to measure financial market stress, especially the gap between yields on ultra-safe U.S. government debt and bonds issued by companies with low credit ratings. When the spread widens, it shows less willingness to hold riskier “junk” bonds.
Junk spreads tightened 22 bps to end the week on Friday at 318 bps. Analysts and investors alike forecast spreads could widen further in the coming weeks and months, as the…
