JNK - U.S. junk bond spreads widen as debt market prices in slower economic growth

Spreads on CCC-rated debt, one of the riskiest subsets of U.S. junk bonds, have widened around 50 basis points in April as investors discount expectations for weaker economic growth and recession risks, Bloomberg reported.  In other words, as the risk premium on CCC bonds increases, investors are demanding more compensation to hold those bonds in the wake of tighter monetary policy, geopolitical tensions, economic uncertainty and increasing chances of a recession. Note that this speculative debt is comprised of companies with large debt levels and with bonds on the brink of default.  Moreover, CCC bonds are showing signs of trouble as spreads have widened 125 basis points this year compared with 57 bps for BB-rated debt and 69 bps on average for all junk bonds, according to data from Bloomberg.  “We are steering away from the most egregious parts of the market in terms of credit risk,” Brandywine Global analyst Jack Parker

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U.S. junk bond spreads widen as debt market prices in slower economic growth