Here is the most unsettling fact in global finance this week: high-yield credit spreads are tightening. HY OAS compressed 18 basis points week-on-week to 3.28%, sitting just 18bp above the 3.10% level that would constitute a full invalidation of the bear case for risk assets. This is happening simultaneously with WTI crude at $111.72, gold at $4,697, and a geopolitical crisis in the Strait of Hormuz that Trump, as recently as March 31st, described in terms of regime destruction and nuclear dismantlement. The credit market, in other words, is serene. The question worth losing sleep over is whether that serenity reflects wisdom or sedation.

Credit spreads are the economy's truth serum. When corporate borrowers feel the heat — rising input costs, weakening demand, tightening margins — it shows up first in the premium investors demand over Treasuries. The fact that this premium is narrowing, not widening, in the twelfth consecutive week of what this publication's macro framework characterises as deepening stagflation is either the most contrarian bullish signal in the market, or the most dangerous complacency since leveraged loan spreads kept grinding tighter into late 2007.

To be precise about the data: the ICE BofA HY Index OAS sits at 3.16% (BAMLH0A0HYM2 as of April 1st), with an effective yield of 7.14%. Investment-grade spreads are similarly composed — the IG index OAS is 0.87%, with BBB-rated paper at 1.10% over Treasuries. The AAA-to-BAA spread differential is a modest 60bp. None of these readings scream distress. None even whisper it.