The junk bond market is showing warning signs as investors demand higher payouts for holding the riskiest debt. High-yield bond yields have reached 8.1%, up from 7.22% a month ago. Credit spreads have widened to 315 basis points, with the lowest-rated cohort (CCC and below) seeing spreads climb dramatically to roughly 1,250 basis points. The U.S. deficit hit nearly $2 trillion in the fiscal year ending September 30. Experts remain cautious but not alarmed, noting the market is “flashing yellow” but “far from red,” with credit quality at a record high and over 60% of the market consisting of BB-rated bonds.
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