Unremunerated credit risk

Bankruptcies are currently rising in the US. This appears understandable given the rising cost of financing due to higher rates putting the weakest, overleveraged companies over the edge. What is however a surprising is that the credit spreads in the high yield space are not increasing. To us, this is another sign that investors are not being remunerated for taking credit risk despite a increasing default risk. Selectivity and prudence in the bond market remain therefore key.