“Spreads Are Tight Because of Good News. The biggest reason that spreads are so narrow today is that economic news has been good. Sustained economic growth has made the possibility of recession seem more remote. Strong fundamentals also play a role, as companies have fortified their balance sheets and locked in lower interest expenses in the years since the COVID-19 pandemic. As a result, defaults have been modest, running below their historical averages – and below Street expectations. Meanwhile, attractive yields have stoked demand in the global high-yield market as investors try to capitalize on higher potential returns and lower perceived risks. By contrast, on the supply front, companies have focused more on reducing debt than on using it for growth or acquisitions. As a result, demand has been outstripping supply, creating a favorable technical backdrop that supports prices and keeps spreads tight.” Læs hele analysen her.
Morten W. Langer
