UBS warns that U.S. corporate credit markets are showing more complacency than equities, with high-yield debt valuations approaching multidecade highs … credit markets are out of step and underpricing the risk of a slowdown.
- risk premiums in the U.S. junk bond market are near their lowest levels in a decade, implying an overly optimistic outlook
- pricing suggests over 5% global economic growth this year, well above UBS’s 2.7% forecast and even stock market expectations of 4.5%
- UBS sees this as a sign of “credit complacency” particularly in the U.S.
- With elevated inflation, UBS warns that risk premiums could widen significantly, especially if the economy weakens.
UBS info comes via Bloomberg (gated).
This article was written by Eamonn Sheridan at investinglive.com.