Credit Spread
The yield premium over Treasuries that corporate bonds offer — compensation for default risk, downgrade risk, and illiquidity.
Definition
Credit spreads are quoted as option-adjusted spread (OAS) for cash bonds or as CDX index levels for derivatives. IG spreads (Bloomberg US Corporate OAS) and HY spreads (ICE BofA US HY OAS) are the standard benchmarks.
Spreads widen in risk-off and tighten in risk-on, often with leads or lags vs equity that institutional desks watch carefully.
Public research record
Research framework · page evidenceCompleted application: Credit Spread
Credit spreads price the real-economy risk that equity often ignores. They're the most reliable cross-asset stress gauge.
| Type | Claim | Scope |
|---|---|---|
| Release fact | The yield premium over Treasuries that corporate bonds offer — compensation for default risk, downgrade risk, and illiquidity. | Credit |
| Release fact | March 2020: HY OAS widened from ~360bp to ~1,100bp in three weeks. The Fed's announcement of the SMCCF credit facility on March 23 capped the move and triggered a violent reversal. | Published example |
Countercase, invalidators, and sources
The relationship is conditional: another driver can dominate the same asset over the selected horizon.
- · The underlying observation changes materially.
- · The selected asset has no measurable exposure to this mechanism.
Why it matters
Credit spreads price the real-economy risk that equity often ignores. They're the most reliable cross-asset stress gauge.
Worked example
March 2020: HY OAS widened from ~360bp to ~1,100bp in three weeks. The Fed's announcement of the SMCCF credit facility on March 23 capped the move and triggered a violent reversal.