US CCC Bond Credit Spreads Surpass 1,000 Basis Points for First Time Since 2023 Banking Crisis

Money & Banking··US·Read original
3▲0 ▼0Impact / 5
Summary · why it matters

The credit spread on US corporate bonds rated CCC has surpassed 1,000 basis points relative to US Treasuries for the first time since the regional banking crisis of 2023. Data from Bloomberg showed the spread at 1,007 basis points on Wednesday, September 30, up from 860 basis points at the start of September and the widest since March 2023, which coincided with the US regional banking crisis that led to the collapse of Silicon Valley Bank and troubles at Credit Suisse. Collin Martin, head of fixed income research and strategy at Charles Schwab, said the US economy remains fairly strong but is not growing at a red-hot pace, while CCC-rated companies are the riskiest group of issuers and are especially sensitive to changes in interest rates. CCC bond spreads have risen steadily since April after investors began to expect the Fed to return to tighter monetary policy to control inflation. Tatiana Darie, a macro strategist at Bloomberg, said selling was clearly concentrated in the lowest-quality credit instruments, reflecting concern that years of restructuring and debt extensions could once again create pressure as interest rates rise and could lead to a new wave of defaults. Barclays said not all CCC bonds are in trouble, noting that some distressed debt is weighing on the overall picture for the CCC group, and that more than half of the worst-performing CCC bonds are in technology, media and telecommunications, especially cable and satellite companies. Corry Short, a strategist at Barclays, said CCC-rated debt currently shows a very high degree of dispersion in performance between individual companies and industries. Companies rated CCC now account for about 8.5% of the US high-yield bond index, down from 9.7% a year earlier, while credit spreads on higher-rated bonds remain relatively stable even as global bond yields have surged and stock markets have fallen.

Impact on assets 3

Financials▲ · 2 stocks
Barclays PLC
BARC
± Mixedrelevance

Barclays is cited for its research view that distressed CCC debt and TMT cable/satellite names skew the index, not for any impact on Barclays itself.

Digital Finance & Tokenization▲ · 1 stocks
Charles Schwab Corp
SCHW
± Mixedrelevance

Charles Schwab's fixed income strategist is quoted on CCC spreads and the economy, but no company-specific impact is described.

Off-coverage companies 1

Bloomberg L.P.Private± Mixed
relevance

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