Maximum Rise In Corporate Bond Spreads Since November (BAC)

Companies are facing higher corporate borrowing costs amid fears that the global economy will slow down. The pace of this rise has been quite fast, accompanied by concerns that companies will not be able to make good on their debt payments.

The yield spread to corporate bonds over government securities widened by 4 basis points to 169 basis points. This was according to the Bank of America Merrill Lynch Global Broad Market Corporate Index (NYSE: BAC. The widening of spreads over three weeks is the longest period in about a year.

Even as Greece, Spain and Portugal's finances raise concerns, there is a fading sense of optimism over prospects of economic recovery. The Japan economy is struggling and there are worries that emerging market values are way too high and not sustainable. "The potential impact of spill-over into other markets has gotten folks to look at risk assets of all types, and you’re seeing a pullback across the globe,” said Andrew Karp, a managing director on Bank of America Corp.’s investment-grade syndicate desk in New York.