CCC Credit Spreads Update

David R. Kotok
Wed Aug 31, 2022

CCC spreads are now significantly higher than the pre-Covid December 31, 2019, level. This widening spread suggests that the Fed’s policy of tightening by raising rates while shrinking its balance sheet is starting to tighten financial conditions.  

Data: Bloomberg; Cumberland Advisors


CCC Credit Spreads Update Chart for Aug-30-2022



(For higher resolution, follow this link: CCC Credit Spreads Update Chart for Aug-30-2022)

It is important to remember that the spread widening is occurring while both components of this credit spread are rising in actual nominal terms. Also note that the energy price rise windfall to bond holders is exhausted. We examine the windfall, and that is why we show two series together so readers can see the spread with and without the energy price windfall. Credit spreads are extremely important, change with high frequency, and function as a market-based leading indicator. In the present case, these two credit spreads are warning of trouble ahead.

David R. Kotok
Chairman & Chief Investment Officer
Email | Bio

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