Chart of the Day - Friday, July 1st, 2022

Today’s Chart of the Day was shared by Drew Wells (@DrewTheCharts). The chart shows High Yield Credit Spreads over the past four years. Drew points out that Credit Spreads have continued to widen out, breaking their 2018 peak around 5.45%. Credit Spreads tend to widen out like this in times of major financial stress, so this is a clear risk-off signal. Drew highlights the fact that the recent ascent has been gradual, as opposed to 2020 where it was more of a vertical spike. This slow climb means that Credit Spreads are probably not near a climax, which could suggest further trouble for the markets.