The credit spread represents the difference in yields between high-risk junk-rated bonds and low-risk U.S. government bonds. When credit markets are liquid the spread narrows, when credit markets are tight the spread widens. The credit spread is a key indicator of the integrity of credit markets. CP tracks the credit spread bi-monthly using data published in the Wall Street Journal. As of Aug. 8th, the credit spread stands at 3.99%. Credit Spread Moves Below 3.0 Percent
April 19, 2010
Narrowing of credit spread indicates the relationship between price and risk of low-risk government bonds and high-risk junk bonds is once again reaching pre-credit crisis levels.
The credit spread, the yield difference between low risk 10-year U.S. treasuries and high risk junk bonds, narrowed to below the critical 3.0 percent mark last Thursday to close at 2.978 percent, according to yield benchmarks tracked by CreditPulse. Read below to learn more about the credit spread and how we could be nearing another credit crisis.
