Ed Altman wonders why markets are priced for certainty

High-yield credit spreads suggest the market is sanguine about credit risks, which puzzles the inventor of the Z-Score, predictor of corporate defaults.

Edward Altman doesn't get it Why have credit spreads on US high-yield bonds returned to below historical averages

Such yield spreads are meant to be leading indicators of investor uncertainty, and today the spreads suggest that the degree of uncertainty is relatively low. Yield-to-maturity spreads on high yield against 10-year US Treasuries have fallen to an average of 450 basis points, about 75bp below the historical average.

Given the headline issues around Greece's bailouts, US fiscal problems and a potential bubble in Chinese real estate, Altman finds this odd.

As a finance professor at New York University's Stern School of Business, Altman is known for inventing a predictor of corporate defaults called...

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