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Credit spreads stay resilient as IG supply hits a record $1.4T
Investment grade spreads were essentially flat in August even as high yield spreads tightened 19 basis points and IG supply reached a record $1.4 trillion year-to-date.
Credit markets have defied seasonal norms and macro uncertainty, with investment grade spreads essentially unchanged in August despite ongoing concerns about AI-related funding, geopolitical tensions in the Middle East, and a more hawkish Federal Reserve posture, according to ETF Trends.
In high yield, corporate spreads tightened 19 basis points during August, a pattern the outlet notes as the sector’s strongest month of the year, helped by strong US corporate earnings this quarter that have supported spread performance despite historically weak late-summer and early-fall periods.
The resilience is occurring alongside a surge in corporate bond issuance, particularly investment grade supply that has climbed to a record $1.4 trillion year-to-date, much of it tied to debt-financed AI-related capital spending that would typically pressure spreads and long-term yields.
ETF Trends also points to the Fed’s Jackson Hole messaging from Fed Chair Kevin Warsh, who emphasized the 2% PCE inflation goal as a fixed target, while Treasury buybacks aimed at suppressing long-end rates have helped absorb some supply pressure, leaving credit dependent on continued earnings strength and steady investor demand.