Credit spreads are informative only when read in context with liquidity, refinancing pressure, and earnings durability.
Absolute vs Relative Value
Tight spreads can still offer value if default expectations are overstated. Wide spreads can still be expensive when fundamentals are deteriorating.
What We Watch
- Refinancing calendar concentration
- Interest coverage trajectories
- Sector-level margin pressure
- Liquidity depth in stressed sessions
Portfolio Implication
Defensive positioning does not mean abandoning income opportunities. It means being paid for each unit of risk and preserving flexibility when repricing begins.