What a Softening Corp. Bond Market Means

The corporate bond market has been soft lately. Using the Bloomberg Barclays Corporate Bond index as a gauge, investors are getting paid an average premium of 1.53% more yield than Treasuries to own Baa-rated corporate bonds (the lower end of investment-grade). That's the highest level since April 2017, and up from just 1.12% on February 1 of this year. Is this a warning sign that the economy could be slowing? Or an opportunity to buy credit? Here are some thoughts about what it means to both bond investors and to the broader markets, plus what to watch for next.

Does the Bond Market Know Something?

There is something of a Wall Street trope that the bond market tends to sniff out recessions before the stock market does. You may have heard someone use this logic when pointing to the flattening yield curve lately, but it is also dragged out anytime corporate bonds are underperforming. I think this is more myth than reality, but that's another column for another time. In this particular case, the idea that bonds know something that stocks don't doesn't hold a lot of water....876 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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