“U.S. corporate bond spreads continue to tighten and are now essentially the same as 2017–2019,” said Nicholas Colas, co-founder of DataTrek Research, in a note emailed Monday. “That is a green light for further stock market gains.”
Investment-grade spreads averaged 1.19 percentage points over Treasurys over that stretch, while junk bonds averaged 3.82 percentage points, according to Colas’s research. Weekend Snapshot: Stocks are on a seemingly unstoppable hot streak, but this bond-market ‘tipping point’ could see it end in a hurry
“Corporate bond markets continue to mirror equity market confidence” in stable and strengthening company cash flows, Colas said. “This is not only supporting the ongoing rally in large caps, but also helping small caps outperform in July.”