The risk premium required for lower-rated corporate debt.
Measures the additional yield investors demand to hold "junk" bonds over safe Treasury bonds. It serves as a proxy for corporate financial health and risk appetite.
The yield of the High Yield Index minus the yield of comparable Treasuries. Widening spreads indicate risk aversion; narrowing spreads indicate confidence.
Spreads <350bps indicate healthy credit markets and risk tolerance.
350-500bps reflects average credit risk pricing.
Spreads >600bps signal credit stress and potential default cycles.
Spreads blow out during liquidity events (2008, 2020) but can remain tight for years during stable expansions.
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