sightCREDIT RISK•Apr 26
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High yield credit spreads back at June 2007 levels amid rising volatility
High-yield credit spreads are sitting around 285 bps, basically the same level as June 2007, even as volatility picks up and equities wobble. The tension is that credit is still pricing calm while tariffs, trade friction, and geopolitical stress keep stacking up.
The divergence is the signal. Defensive rotation into utilities over tech has led volatility spikes by 3-6 weeks, and the 10Y-2Y inversion has preceded every US recession since 1955 with about a 14-month lag. The argument: tight spreads mean low pay for risk, not low risk, and past extremes like 2007 and 2019 ended with sharp widening.
The divergence is the signal. Defensive rotation into utilities over tech has led volatility spikes by 3-6 weeks, and the 10Y-2Y inversion has preceded every US recession since 1955 with about a 14-month lag. The argument: tight spreads mean low pay for risk, not low risk, and past extremes like 2007 and 2019 ended with sharp widening.
Timeline3
Mar 29
Core version of the claim circulated: tariffs, trade wars, and geopolitical escalation were not being reflected in still-low credit spreads.
Apr 22
Lead-Lag tied defensive rotation and yield-curve signals to rising volatility and recession risk.
Apr 26
Lead-Lag restated that macro indicators, volatility, and geopolitics were flashing caution while credit spreads stayed tight.
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Apr 26