Goldman Sachs: If high-yield bond spreads reach 500 basis points, it may prompt the Federal Reserve to shift its policy stance

According to a recent research report by Goldman Sachs analyst Lindsay Matcham on April 8th, if credit spreads continue to widen and the bond market prices recession, it will prompt the Federal Reserve to take action. The expansion of credit spreads may pose difficulties for corporate financing and lead to a weakening of the job market. If the yield spread of high-yield bonds continues to widen to 500 points, Powell is likely to intervene and change policy stance as he did in 2018. Powell's attitude was relatively tough last Friday, but this was mainly due to the fact that the sharp decline in the US stock market was driven by events, the performance of non farm payroll data was still good, and given that tariffs may push up inflation in the future, he does not want to use policy "bullets" too early. However, the current high-yield bond spread has reached 454 basis points, just one step away from the dangerous threshold of 500 basis points. The probability of a rate cut at the May Federal Reserve meeting in the report is only 51%, indicating that the bond market needs further adjustment to prompt Powell to change his policy stance, which may trigger a stock market rebound. (Observations from Wall Street)