Junk Bonds Point to a 50% Chance of a Recession, Citi Says
- Spreads on US junk debt are hovering around 500 basis points
- Investors should be ‘more cautious’ and ‘reset expectations’
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Junk-rated debt is indicating that the chance of a recession is essentially a coin flip as risk premiums on high-yield corporate credit touch levels last seen in October 2020, according to strategists at Citigroup Inc.
Spreads on US high-yield bonds are currently hovering around 500 basis points, while risk premiums on some of the lowest-rated corporate debt is closing in on 1,000 basis points, which is considered a distressed level.