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Will HY corporate spreads stay below 350bp through Q2 2026?
The Condition
Fed cuts ≥25bp at March 18, 2026 FOMC meeting
Our Ensemble Estimates
Given Fed cuts ≥25bp: Will HY corporate spreads stay below 350bp through Q2 2026?
Given Fed holds: Will HY corporate spreads stay below 350bp through Q2 2026?
Causal Effect
A Fed cut has negligible effect on HY spread stability — spreads are well below 350bp with strong cushion regardless of the rate decision
Why This Matters
Tests whether a rate cut reinforces the current loose financial conditions regime. HY spreads are at 288bp (43rd percentile of 5-year range), well below the 350bp threshold that would signal a shift to NEUTRAL conditions. A cut would signal easier policy ahead, potentially compressing spreads further. Financial conditions (NFCI -0.568) are already the loosest in 12 months.
Resolution Criteria
ICE BofA US High Yield Index Option-Adjusted Spread (FRED: BAMLH0A0HYM2) daily closing value does NOT exceed 350bp at any point between March 18, 2026 and June 30, 2026
Source Analysis
HY OAS crossing above 350bp signals meaningful risk-off and shifts FINANCIAL_CONDITIONS toward NEUTRAL