Corporate Bonds & Credit Risk — Capital Markets

§ 01

Rating Tier	Spread Range	Default Rate	Examples
AAA-AA (highest quality)	0.3-0.8%	<0.1%/year	Microsoft, Johnson & Johnson
A-BBB (investment grade)	0.8-2.5%	0.1-0.5%/year	Most large corporates
BB-B (high yield/junk)	2.5-6%	1-5%/year	Smaller companies, leveraged firms
CCC and below (distressed)	8%+	15%+/year	Companies facing financial stress

§ 02

Explore the **Credit** view to see bond data organized by rating. Compare spreads across quality tiers.

§ 03

Credit spread movements are an early warning system. When spreads widen sharply, the bond market is pricing in rising default risk, often before the stock market reacts.

§ 04

A BBB-rated corporate bond trades at 180bp spread over treasuries. Historical average spread: 140bp. Disciplined read?

Five questions · AI feedback

Sit with the ideas.

An A-rated corporate bond yields 5.4%, and the comparable Treasury yields 4.2%. The bond has an estimated 0.5% annual default probability and 50% recovery rate. Is the spread adequate compensation for credit risk?

Why:

Sit with the ideas.

Other lessons in this course.