Barclays CEO Jes Staley aptly warned in January of an impending volatility jolt. Now he's made his call for the next big market risk: credit markets.
"The markets to watch are the credit markets," Staley told CNBC on Thursday, when asked about his biggest concern for the future.
"There are some good signs and some negative signs. Clearly, interest rates are going up in the U.S. and the U.K. What's a little disconcerting is credit spreads have also widened concurrent with the risk-free rate going up," the CEO said. "That generally doesn't happen."
Widening credit spreads — the difference in yields between bonds with the same maturity date but different risk ratings — generally signal growing worry about corporate borrowers' ability to make their debt payments.
As banks had to cut down lending in the aftermath of the financial crisis, corporates have been turning to bond markets in greater droves.
According to fund management firm Ironshield Capital, issuance of high-yield bonds between 2013 and 2017 was three times higher than it was between 2008 and 2012. This has been helped by a decade of monetary stimulus and cheap lending from central banks, who are now moving toward normalizing policy and raising interest rates.