Spreads on U.S. junk-rated corporate bonds have surpassed 500 basis points for the first time since November 2020. Junk bond is another name for a high-yield bond.
On Thursday, the spread rose by 31 basis points to 508 points according to data from the Bloomberg U.S. Corporate High Yield index.
In the past two weeks, junk spreads have risen by 100 basis points amidst the U.S. Federal Reserve’s attempts to control inflation by raising interest rates, a move that has triggered concerns that it might push the American economy into recession.
Spreads are a measurement of the extra yield that investors need to park their money in corporate junk bonds. The higher the yield premiums move, the more expensive it would be for companies to borrow money using these bonds, especially firms with high debt loads or poor credit ratings….