The bond market affirms a solid economy

Corporate bond risk premium over Treasuries is low

Bloomberg US Intermediate Credit Index, spread over Treasuries

Source: Bloomberg, as of August 4, 2026; Chart shows option adjusted spreads.

Credit spreads—the yield premium investors demand for holding corporate bonds rather than government-guaranteed debt—are an important signal of the health of corporate America. A broad corporate bond index diversified across economic sectors is recognized by the Federal Reserve as a key leading indicator for the economy.

The chart shows credit spreads on an investment-grade bond index. The current risk premium versus Treasuries is well below the historical average, suggesting that investors remain relatively confident in lending to the private sector. That optimism is supported by a strong profit backdrop, with S&P 500 earnings growth expected to approach 25% this year.*

Not all debt is created equal, as balance sheet quality varies. However, below-investment-grade debt (so-called “junk” bonds) is also trading at spreads well below the historical average. There is also an AI angle in credit markets: over the last six months, 30% of new investment-grade issuance has come from the AI hyperscalers.**

What we’re watching this week

Wednesday: The July Consumer Price Index will be released. Moderate increases in both the headline and core rates are expected.

Friday: Retail sales for July will be reported. Spending has accelerated so far in 2026 compared with last year.

Throughout the week: Negotiations between the US and Iran will be closely monitored, with many analysts projecting a binary outcome—either a resolution regarding the operation of the Strait of Hormuz or a return to hostilities.

*Source: FactSet, as of 8/5/26.
**Source: UBS, 8/3/26.