Goldman Sachs Exchanges Are credit investors nervous about recession risk?
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Mar 18, 2025 Lotfi Karoui, Chief Credit Strategist at Goldman Sachs, joins to unravel the latest shifts in the credit markets. He discusses the rising yields on corporate bonds and what that signals for economic outlook. Karoui explores opportunities within global credit markets amid recession fears, contrasting the performance of US and European markets. He also highlights the resilience of agency mortgages, their appealing valuations, and the minimal risks during economic fluctuations—making them an intriguing investment choice.
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Rising Corporate Bond Spreads
- Corporate bond spreads have risen dramatically, reflecting a higher risk premium.
- This suggests that bond investors are reassessing the economic outlook.
Drivers of Spread Increase
- The rise in spreads reflects a market adjustment to higher volatility and policy uncertainty.
- It is driven by a need to realign risk premiums with the new economic reality.
Recessionary Concerns
- The increase in spreads reflects growing concerns about a potential recession.
- Despite recent market jitters, current fundamentals remain relatively strong.