About a month ago, we noted that the spread between high yield bonds and treasuries was not confirming the all-time high in the S&P 500. Since that time, we have had a slight turnover in the equity market but an even larger move in junk bonds. The spread between junk bonds and 10-year treasuries is currently at 520 basis points. This is the widest the spread has been since August 2012. A small part of this move can be attributed to the 10-year treasury yield declining by 17 basis points during the past month.
However, junk spreads are widening against investment grade bonds as well. The spread between high yield bonds and AAA bonds is back at the level seen at the end of October and any further widening from here would send spreads to the widest levels in over a year.