What's driving credit spreads
Drivers | EU Spreads
vs
TECHNICALS | top driver
Insights
18-08-2026
CONCEPT
Credit spreads are the market’s primary fear gauge for corporate debt. We monitor spreads alongside long-term yields and equities to pinpoint whether their shifts are driven by interest rate volatility or fundamental changes in investor confidence.
CURRENT READINGS
- Looking at the past two weeks - flat EU IG spreads and lower government bond yields display a weak correlation of -0.15 (turning more negative) showing no clear relationship. In parallel, flat EU IG spreads and lower stock prices display a weak correlation of -0.15 (softening) showing no clear relationship.(Toggle for HY spreads)
- In general terms, we should expect spreads to be negatively correlated with both stock prices and bond yields.
MARKET IMPLICATIONS
- Yields check - In the past few sessions, EU IG spreads have been moving independently with respect to government bond yields. Equity check - EU IG spreads have been moving independently with respect to stock prices. Overall, the broader market behavior reflects rising inflation, which is causing doubts on future growth prospects despite solid economic data until now. (Toggle for HY spreads)
- In summary - Given the irrelevant correlation readings, it is clear that the spreads in focus have not been influenced in major ways by either stock prices, sentiment, expected growth, inflation or monetary policy changes recently. They have been affected by technical factors instead, such as rebalancing of supply and demand
Viceversa, compressing spreads are normally driven by either rising yields or rising stock prices, on the back of higher expected growth or improving investor sentiment.
Drivers | US Spreads
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INFLATION | RATES | top driver
Insights
17-08-2026
CONCEPT
Please refer to the same intro as above.
CURRENT READINGS
- Looking at the past two weeks - higher US IG spreads and lower government bond yields display a positive correlation of 0.67 (increasing) moving together frequently. In parallel, higher US IG spreads and lower stock prices display a weak correlation of 0.36 (softening) showing no clear relationship.(Toggle for HY spreads)
- In general terms, we should expect spreads to be negatively correlated with both stock prices and bond yields.
MARKET IMPLICATIONS
- Yields check - In the past few sessions, This is bad news, as the two income components of US IG bonds (the underlying yield plus the spread) have both caused losses in fixed income portfolios, with respect to government bond yields. Equity check - US IG spreads have been moving independently with respect to stock prices. Overall, the broader market behavior reflects an improving growth outlook. (Toggle for HY spreads)
- In summary - The recent journey of bond yields has influenced the credit spreads in focus more than equity prices - in other words, inflation and monetary policy changes remain top of mind for investors, while the recent equity trend remains uninspiring for credit investors.
Viceversa, compressing spreads are normally driven by either rising yields or rising stock prices, on the back of higher expected growth or improving investor sentiment.