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Finance

What Do Widening Bond Spreads Indicate?

Taking a look at the trend in credit spreads historically, we can see that spreads in the United States rose from mid-2014 to February 2016. Though credit spreads have taken a turn since then, moderating downward a bit, they are still at recession levels.

Further rate hikes by the Federal Reserve will be a sign of the Fed’s seeing improving economic conditions in the United States. This improvement would result in a fall in credit spreads.

The higher the spread, the more credit risk your investment in fixed income (BND) (AGG) bears. As long as any further rate hike is delayed by the Fed, you can expect spreads to continue to moderate.

View more information: https://marketrealist.com/2016/04/widening-bond-spreads-indicate/

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