Goldman Sachs Group Inc. is revising up its forecast for credit spreads, saying risk premiums are set to build as central banks withdraw stimulus and slower economic growth impacts corporate profitability.
The Wall Street bank expects yield premiums on investment-grade dollar notes to hit 140 basis points by end-2022, compared with a previous forecast of 123 basis points. According to a Bloomberg index of corporate investment-grade securities, spreads were at 123 basis points on Wednesday. For euro credit, it also sees an increase.
“A further rebuilding of risk premium lies ahead,” strategists including Lotfi Karoui wrote in a note to clients. “Should real yields continue to be the dominating force pushing rates higher, extending the current trend, investors will start to face the risk of a ‘double whammy’ of much wider spreads and higher rates.”
This article was provided by Bloomberg News.