US corporate bonds have performed well during the past few months despite a backdrop of deteriorating credit fundamentals, i.e. a rising default rate and ratings downgrades outpacing upgrades. We update our 12-month US default rate forecast and determine that a continued increase is likely during the next 12 months, from 3.1% up to 4.1%. Relative to our default expectations, we determine that US investment grade corporate spreads are currently slightly cheap to fair value, but that US high-yield spreads are quite expensive.