...If you believe the economy is slowing. If you expect a recession, they are way too tight!
ICE BofA US Corporate Index Option-Adjusted Spread, Percent, Daily, Not Seasonally Adjusted
Source: Federal Reserve Bank of St. Louis
Why are spreads so tight? Because it has recently been salad days for issuers: we've just seen the largest inflows into credit funds since 2021. The economy was in a different place then, and certainly rates were different.
Average investment grade spreads have actually declined (in the past two weeks) below the average (133 bps) of the past 10 years. They were at 170 bps over back in October 2022.
Something tells me that is better pricing than what we're seeing now.
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