The yield premium offered by investment-grade bonds has shrunk to an almost three-decade low. ...

Group 1 - Goldman Sachs credit strategists are urging clients to hedge risks as the yield premium on global corporate notes has narrowed to its lowest level since 2007 [2][3] - The narrowing yield premium on global investment-grade notes has reached 79 basis points, the lowest since July 2007, just before the global financial crisis [3] - Despite the significant narrowing of credit spreads and the S&P 500 reaching a record high, Federal Reserve officials have avoided signaling imminent rate cuts, indicating a need for more data to assess inflation risks [3] Group 2 - Goldman Sachs economists still expect the Federal Reserve to cut rates by 25 basis points in September, October, and December, with two additional cuts anticipated in 2026 [3] - The report highlights that trade policy has become more predictable compared to March and April, allowing the market to significantly lower the pricing of recession risks [3] - As investors begin to digest the differentiated impacts across the supply chain, the effects will become increasingly important through industry-specific variations [3]

Core Insights - Goldman Sachs credit strategists urge clients to hedge risks as global corporate bond yield spreads have tightened to the lowest level since 2007 [1] - Recent trade agreements between the US and several trading partners provide clarity on tariff issues, leading investors to overlook short-term economic growth weakness as long as recession risks are controlled [1] - Bloomberg index indicates that global investment-grade bond yield spreads narrowed to 79 basis points, the lowest level since July 2007, prior to the global financial crisis [1] Economic Context - The S&P 500 index reached a historical high this week, reflecting investor confidence despite tightening credit spreads [1] - Federal Reserve policymakers have not indicated an imminent rate cut, suggesting that more data is needed to ensure inflation risks do not persist [1]