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Quarter-End Insights

Credit Market Outlook: Corporate Bonds in for a Struggle

With interest rates poised to rise further and credit spreads near their tightest levels since the end of the 2008–09 credit crisis, we expect rising rates to largely offset the yield that investment-grade corporate bonds currently offer.

  • Rising rates and tight credit spreads will constrain corporate bond returns.
  • On a ratings-adjusted basis, investment-grade credit spreads are near historical lows.
  • We have a balanced view that corporate credit risk will either remain stable or improve slightly, but that the tightening in credit spreads on those names will probably be offset by an increase in idiosyncratic risk.