This Uncommon Signal Last Appeared in 1998—Subsequently, Stocks Soared

Bond Market Signal: A rare bond market signal has emerged in mid-August 2025, reminiscent of conditions before a significant bull market in the late 1990s, indicating strong investor confidence in corporate debt.

Narrowing Credit Spreads: The spread between U.S. investment-grade corporate bonds and Treasury yields has fallen to 75 basis points, suggesting that investors are willing to accept minimal risk premiums for corporate debt compared to government securities.

Broad-Based Credit Rally: Unlike the narrow equity rally dominated by a few tech giants, the investment-grade credit market is experiencing broad participation, with nearly all sectors benefiting from the tightening spreads.

Future Outlook: Goldman Sachs predicts that as long as recession risks remain low, corporate credit spreads may stay tight, reflecting growing confidence in the overall health of the corporate sector, similar to patterns observed prior to previous market rallies.