Corporate Bond Markets Remain Sanguine
While the recent inversion of the US Treasury curve has been ringing alarm bells, corporate bond investors do not seem to be phased by the possibility of a recession. As our chart shows, average credit spreads (US and European high yield bonds and emerging market credit default swaps) remain relatively attractive and valuations, as measured by the Z-score, are not particularly expensive. The corporate bond market is, it seems, sending out a much more positive signal for the global economic outlook than the yield curve.
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