Credit spreads
Updated
What it is
A credit spread is the extra yield investors demand on a corporate bond over a comparable-maturity Treasury bond to compensate for default and liquidity risk, and it is the standard market gauge of perceived corporate credit risk. Spreads are usually quoted in basis points as an option-adjusted spread (OAS) and move with the economic cycle, typically widening when recession fears or defaults rise and narrowing when growth and risk appetite are strong.
Why it matters lately
Spreads have been unusually tight through 2026: US investment-grade corporate bond spreads over Treasuries fell to about 71 basis points in late January 2026, the lowest level since 1998, before easing only slightly to 0.86 percentage points (86bps) by October 1, 2026. High-yield spreads stood at 3.24 percentage points (324bps) on the same date, also low by historical standards despite the 2026 Iran war's oil shocks and a volatile year for interest rates.
Asymmetric Analytics view
Inference (AA): Credit spreads are the graph's barometer for recession and default risk, linking Fed policy, the Iran war's growth shock, and corporate credit stress to other nodes.