Tags: Goldman | sachs | Bond | Recession

Goldman Sachs: Bond Data Show Recession on Horizon

Friday, 14 Oct 2011 09:12 AM

Spreads between corporate and U.S. government debt are widening, at tell-tale sign a recession is brewing, according to Goldman Sachs data.

"As several people have noted over the past several weeks, the current spread between corporate bond yields (of various flavors) and Treasurys is definitely in recession territory," Business Insider reports.

"In fact, jumps like this are basically always associated with recessions."

Spreads, the difference on what corporations pay on their debt and what the government pays, are getting wider, which shows investors want more in return for financing businesses worldwide, especially in the financial sector.

"What's all this tell you? Well, perhaps things are going to get very bad," Business Insider adds.

But a second look may show markets have been overreacting on news of default scares in Europe, and spreads may narrow when calmer minds prevail.

Goldman Sachs analysts have said the U.S. economy will likely avoid dipping back into recession but add the risks of a fresh downturn are high and getting higher.

Any recession would be shallow but painful, bringing unemployment rates up to 12 percent from their current levels of around 9 percent.

"Our base-case forecast continues to be that the U.S. economy will avoid a recession, though the risks are high and rising," says Goldman Sachs analyst Zach Pandl, according to CNBC.

"While we do not think limited policy options would mean a deeper recession, they would likely imply a more tepid rebound. Whatever the outcome, a U.S. recession today would be painful."

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Spreads between corporate and U.S. government debt are widening, at tell-tale sign a recession is brewing, according to Goldman Sachs data. As several people have noted over the past several weeks, the current spread between corporate bond yields (of various flavors) and...
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2011-12-14
Friday, 14 Oct 2011 09:12 AM
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