What Economic Dangers Is the Bond Market Pricing In?

Even more so than stocks, bonds are often seen as an economic bellwether. If so, they are heading in a positive direction. The difference, or spread, between Treasury yields and the rate at which companies borrow has widened. Option-adjusted spreads on investment-grade paper issued by blue-chip corporations closed at 1.11 percentage points—a result of the recent stock market selloff. Spreads on debt issued by high-risk issuers hit 3.81 percentage points, the highest since November. U.S. municipal bonds have also been impacted.