Bloomberg Surveillance · Monday, September 28, 2026
Bob Michael observes that credit spreads are widening, a trend not seen for much of the year, indicating that the rise in yields is starting to impact the economy. Businesses are finding it harder to finance themselves, and corporate borrowers' costs are increasing.
“We're starting to see some instability. Maybe that's not the right word, but starting to see some spread, widening and credit. Lisa went through the details. That's something we haven't seen for much of this year. seen some jitters beneath the surface, particularly in triple Cs, but now starting to migrate to the headline index level, spreads wider for the past few sessions. What do you think is happening with credit now? We've seen signs that maybe this Fed action might be biting elsewhere.”
“For sure. One of the things we've talked about is, can the Fed actually do a total of six rate hikes, go from three and five-eighths to five and an eighth, because if they can't, then bond yields of over 5% are pretty much a gift to you, which is where we think we are. We have already seen that the rise in yields, the 110, 130 basis points back up in yields, is starting to slow the economy. We know that businesses are struggling more to finance themselves in the public markets. We know that if you're a corporate America floating rate borrower through the bank loan market, your costs are going to go up significantly. And of course, there's the housing market. I don't believe mortgage rates have dropped down to 4% again.”