UBS warns that U.S. corporate credit markets are showing more complacency than equities, with high-yield debt valuations approaching multidecade highs ... credit markets are out of step and underpricing the risk of a slowdown.
- risk premiums in the U.S. junk bond market are near their lowest levels in a decade, implying an overly optimistic outlook
- pricing suggests over 5% global economic growth this year, well above UBS's 2.7% forecast and even stock market expectations of 4.5%
- UBS sees this as a sign of "credit complacency" particularly in the U.S.
- With elevated inflation, UBS warns that risk premiums could widen significantly, especially if the economy weakens.
UBS info comes via Bloomberg (gated).
