While the stock market is getting all of the attention, the bond market is experiencing a lot of turbulence as well. The riskiest corners of the debt market, including junk bonds and loans, are on pace for their worst month since the US downgrade in August 2011. High yield’s spread to Treasuries has surged a whopping 110 basis points since the start of the month, and unlike in stocks, there aren’t signs of a rebound. The average yield on the index is 8%.
FINSUM: It is reasonable to be nervous about credit right now given the huge volume of issuance in recent years and the pending threat of a recession and accompanying earnings slowdown.