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The Credit Spread

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 monthly using data published in the Wall Street Journal.  As of Dec. 14, 2012, the credit spread stands at 3.420%. 

Recent Articles

Credit Bubble II

May 30, 2011

The credit spread, a key liquidity and macro economic indicator that represents the difference in yield between high-risk junk bonds and the low-risk 10-year treasury bond, is once again below the critical 3 percent mark.  "They're overlooking the risk."

In the May 2008 issue of Fortune magazine, Harvard trained economist Geoff Colvin wrote that June 13, 2007 was the day that the markets "rediscovered risk."  Get the latest on the credit spread and comments from bond and fund managers who think the thirst for risk may be getting out of hand.

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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.

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