Risk premiums in the CCC tier of the bond market have jumped more than 150 basis points this year. Still, some argue spreads aren’t yet fully reflecting concerns about growth, trade, and geopolitics.

Long-dated Treasuries have become less attractive to investors since Moody’s downgraded the United States from AAA, reinforcing Wall Street’s worries over the U.S. sovereign bond market.

“Liquidity in on-the-run bonds [$1 billion-plus deals sold in the past year] has improved, but off-the-run paper [smaller in size and issued more than two years ago] has become virtually untradeable.”

Financial institutions raised a total of $16.5 billion in the U.S. investment-grade market today.

UBS expects the premium investors require over U.S. Treasuries rates to reach 160–170 bps for high-grade debt and 600–650 bps for junk debt by midyear.

The extra yield investors demand to own junk bonds instead of Treasuries widened by 45 bps yesterday, to 386 bps.

Thanks to good trades prior to M&A, credit downgrades, and defaults, the insurers in the top quintile for dealer-network size achieved about 0.84 percentage point higher annual returns on corporate bonds, according to a recent study.

“We increasingly view a large-scale pullback in spending driven by uncertainty about tariffs, DOGE layoffs, and weakness in equities as a non-trivial tail risk.”