High-Yield Credit Spread
The additional yield that below-investment-grade ("junk") corporate bonds offer over comparable-maturity U.S. Treasuries. A key measure of credit stress and risk appetite.
The high-yield spread — most commonly tracked via the option-adjusted spread on the ICE BofA U.S. High Yield index (series ID BAMLH0A0HYM2) — quantifies the credit-risk premium demanded by investors to hold below-investment-grade corporate debt instead of risk-free Treasuries. When the spread widens, investors are demanding more compensation for default risk, which typically reflects rising expected defaults, tighter financial conditions, or a broader flight-to-quality.
High-yield spreads are one of the most sensitive real-time gauges of financial stress. During the 2008 financial crisis, spreads exceeded 20%. In the March 2020 COVID shock, they peaked near 11% before the Fed's corporate credit facilities pulled them back. In calm expansions, high-yield spreads often trade below 3.5%.
Because credit-market stress typically precedes equity market drawdowns and correlates with the credit cycle, high-yield spreads are a valuable input to recession probability models and risk-on/risk-off classification. BullrunData exposes BAMLH0A0HYM2 via /api/v1/indicators/BAMLH0A0HYM2 and factors it into the composite recession probability model.