The above chart from the FRED system shows corporate spreads have widened. The Aaa (red line, left scale) rose from 1.6% to 1.9% since the first of the year while the Baa spread (blue line, right scare) increased from 2.2% to 3.2%, but over a longer time period (approximately mid-2014 to now).
The CCC chart is more concerning:
In March, the CCCs yielded ~10%; the number is currently just under 14%, an increase of a little under 300 basis points.
Why is this happening?
- Some of the increase is due to the oil patch, as once high-flying companies are seeing their credit rating drop with oil prices.
- Some of this will be due to industrial companies selling large durable goods to the energy and materials sector.
- There is also concern about corporate credit generally, especially in an era of potential Fed hikes.