Weekly Market Summary

Extra Credit^*

• Option-adjusted spreads for investment-grade corporate and high-yield bonds are now wider year-to-date and currently sit at 103 and 427 basis points, respectively. Following “Liberation Day,” the widening the after day of high-yield spreads was the largest in one day for the index since the pandemic.
• But even with the recent selloff, spreads are by no means wide by historical standards: investment-grade spreads are at the 28th percentile of their range since 2000, and high-yield spreads are at the 37th percentile.
• While those percentiles are no longer extreme (as a reminder, at the end of February, investment-grade and high-yield spreads were at the 4th and 5th percentiles, respectively), spreads remain well below levels that prevailed in prior recessions. Investment-grade spreads breached 150 basis points in the most benign of the past four recessions, while high-yield spreads widened above 1,000 basis points during or immediately following the other three.
• Fundamentally, the current mix of policies in the U.S. may lead to lower growth and keep demand elevated for safe assets such U.S. Treasuries (for example, a reduction in the trade deficit could result in weaker demand for riskier assets).
• Bank-loan and high-yield bond default rates, excluding distressed exchanges, finished February at 1.26% for high-yield bonds and 0.27% for bank loans, down from 1.50% and 0.30% in January. This is also well below the long-term historical default rate of 3% for loans and 3.4% for high yield, and the historical post-GFC default rates of 2.3% and 2.5%, respectively.

Sources: Bloomberg and JP Morgan as of 4/7/25.