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US Junk-Bond Spreads Top 500 Basis Points in First Since 2020

  • Average risk premiums on junk bonds climb to 508 bps
  • Borrowers are paying up on new deals as recession fears rise

Spreads on US junk-rated corporate bonds, an important gauge of risk that signals higher defaults when it increases, surpassed 500 basis points for the first time since November 2020.

The figure, which measures the extra yield investors demand to hold the debt instead of US Treasuries, increased 31 basis points on Thursday to 508 basis points, according to the Bloomberg US Corporate High Yield index.