This post on X by @lisaabramowicz1 just crossed my timeline and reminded me of the posts I've been seeing right after the events at the start of August.
In fact, one of the things people have been pointing to when we got the growth scare was the widening of the US credit spreads. A "credit spread" refers to the difference in yield (interest rate) between a US corporate bond and a US Treasury bond of the same maturity.
These spreads serve as a measure of the additional risk that investors perceive in lending to corporations compared to lending to the US government, which is considered to have a very low risk of default.
There are many factors that can influence the spreads but the main one is the perceived risk given by the economic outlook. In fact, in times of economic uncertainty or downturns, credit spreads typically widen as corporate bonds are seen as riskier and get shunned for Treasury securities.
As we can see from the image above, we got a spike at the beginning of August triggered by the ISM Manufacturing PMI and then exacerbated by the weak NFP which might have been also responsible for the rout in the Nikkei on Monday morning. We can argue on the exact catalysts but anyway the spike has been fully reversed and we are now back at the levels seen before August 1st.
This is just another piece of the puzzle which should calm the markets and keep the positive sentiment going as we head into a Fed's easing cycle with resilient growth. (at least until the next scare)