Are credit investors nervous about recession risk?

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  There's understandably been a lot of attention paid to U.S. stocks recently,

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  but there's also something quite interesting happening in the U.S. bond market.

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  Corporate bond spreads that reflect the additional yield on corporate bonds above government bond yields have risen dramatically in the past month.

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  So what should we make of that?

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  Does it mean that bond investors are hunkering down for a recession?

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  I'm Allison Nathan, and this is Goldman Sachs exchanges.

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  Today, I'm joined by Latvi Kheroui,

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  our chief credit strategist and the head of credit, mortgages, and structured products research.

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  Latvi, welcome back to the program.

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  Thank you for having me.

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  So Latvi first catches up, there's a lot going on.

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  Give us some sense of what's been happening in the corporate bond markets in recent weeks.

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  Yeah,

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  so there is this general perception among many people

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  that corporate credit has sort of been resilient and it's outperformed its beta relationship to the equity market.

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  That's actually just optical illusion.

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  If you look at how much spread widening we've had since the peak of the market in mid-February,

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  it's been exactly equivalent to what you should expect with an S&P that is down roughly eight to eight and a half percent.

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  And so I think what's creating a little bit of confusion is really

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  that the starting level is so tight and optically it looks like investment grade spreads are still below 100 basis points,

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