The surprising message of the junk bond spread

The U.S. economy is in relatively good shape—perhaps even stronger than average.

That’s the surprising message of an indicator with an enviable record of anticipating recessions: The interest-rate spread between high-yield (aka junk) bonds and Treasurys. Since high yield/junk bonds are those most vulnerable to default in the event of an economic downturn, it makes sense that the yield spread between them and Treasurys would widen considerably as the economy weakens and eventually turns down. The spread’s track record since…