A powerful rally across financial markets sparked this month as more investors bet on the Federal Reserve pivoting away from aggressive interest rate hikes has gone “too fast, too soon” for debt tied to major U.S. corporations, warned a team of Goldman Sachs credit researchers.
Corporate earnings, however, have been retreating from record levels, while tighter financial conditions and recession fears fueled a dramatic rout in stocks and bonds in the first half of the year. At last check, bonds of investment-grade companies deemed a relatively low default risk were paying investors a roughly 1.54% spread, or premium above the risk-free Treasury rate TMUBMUSD10Y, 2.651%, according to the ICE BofA US Corporate Index. That’s down from a 1.65% high so far this year, but off the lows closer to 0.86%.