Chris Alwine, the Global Head of Credit at Vanguard Group, recently projected the possibility of the U.S. economy facing a recession in the second half of this year. Such an event could significantly stifle the upward movement of corporate bonds.
Alwine's forecast primarily stems from the prediction of escalating unemployment due to a weakened labor market. Furthermore, he posits the risk of the Federal Reserve's potential delay in implementing necessary interest rate cuts.
Vanguard Group's data reveals that a marginal downturn of the U.S. economy could expand the spread between U.S. investment-grade corporate bonds and U.S. Treasuries to 150 basis points from the current 94. However, keeping in view what Alwine identifies as the 'relatively healthy' state of corporate fundamentals, he doesn't anticipate a high number of credit rating downgrades or debt defaults.