Spreads and default rates by rating tier
| 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 |
Compare spreads across quality tiers in Credit
Explore the Credit view to see bond data organized by rating. Compare spreads across quality tiers.
Credit spreads as an early warning system
Judging a BBB spread above its historical average
A BBB-rated corporate bond trades at 180bp spread over treasuries. Historical average spread: 140bp. Disciplined read?
Check your understanding
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: