Spreads on IG bonds have been tight for most of the past year. Are we finally going to see a widening out of spreads? Even though spreads have been unusually tight for a long time, we expect that spreads will remain tight until markets become convinced about either a recession or a soft landing before we see material and persistent spread widening.
“Progressively softer labour market conditions and positive inflation developments support gradual rate cuts, allowing the Fed to bring policy rates closer to neutral levels.”
“The Federal Reserve is continuing its cut-rate path, but it will be increasingly vigilant towards any inflation risks. We expect volatility in bond markets to persist.”