Credit Markets Are Way Underpricing Recession Risk, UBS Says
- Bank sees corporate bond spreads retesting year’s wides
- Second quarter earnings show leveraged loan market at risk
Photographer: John Taggart/Bloomberg
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US corporate credit spreads were not adequately priced for Federal Reserve Chair Jerome Powell’s hawkish comments at Jackson Hole, and are significantly underpricing the risk of a recession, according to UBS Group AG strategists.
Current credit spread levels imply a 25% chance of a recession, compared to UBS’s forecast of a 55% chance, strategists led by Matthew Mish wrote Tuesday.