Credit spread measures the extra interest yield default risk premium demanded by investors to hold junk bonds over Treasuries.
Formula: US High Yield Bond Yield minus US Treasury Benchmark Yield (or HYG ETF / LQD ETF ratio)
| Indicator Parameter | Value / Specification |
|---|---|
| Indicator Name | High Yield Credit Spread |
| Ticker Symbol | HYG/LQD |
| Normal Baseline Range | 3.00% - 4.80% |
| Unit of Measure | Percentage Spread (%) |
| Authoritative Source | ICE BofA Credit / FRED |
Tight credit spreads (<3.5%) signal easy corporate refinancing. Widening spreads (>5.0%) signal credit distress.
Source: ICE BofA Credit / FRED (https://fred.stlouisfed.org)
Widening spreads precede stock market pullbacks as corporate funding costs escalate.
Surged above 10% during 2008 and 2020 crises.
Credit spread measures the extra interest yield default risk premium demanded by investors to hold junk bonds over Treasuries.
Tight credit spreads (<3.5%) signal easy corporate refinancing. Widening spreads (>5.0%) signal credit distress.
Widening spreads precede stock market pullbacks as corporate funding costs escalate.
Surged above 10% during 2008 and 2020 crises.
Widening credit spreads mean risk aversion is increasing in corporate debt markets, signaling refinancing stress and economic slowdown.