Typical spreads by credit rating
| Rating | Category | Typical Spread | Default Risk |
|---|---|---|---|
| AAA-AA | Investment Grade | 0.3-0.8% | Very low (<0.1%/year) |
| A-BBB | Investment Grade | 0.8-2.0% | Low (0.1-0.5%/year) |
| BB | High Yield | 2.0-4.0% | Moderate (1-2%/year) |
| B-CCC | High Yield | 4.0-10%+ | Elevated (3-15%/year) |
Why widening spreads signal market stress
When spreads widen (increase), it signals rising fear in credit markets. When spreads tighten, it signals confidence. Spread movements are a leading indicator of economic stress.
Compare investment-grade and high-yield spreads
In the Credit view, look at bond spreads for different rating categories. Compare investment-grade to high-yield spreads.
Two same-rated bonds, different spreads
Two 10-year BBB-rated corporate bonds from the same sector. Bond X has 180bp spread to Treasuries; Bond Y has 280bp spread. Same maturity, same rating. What's the most defensible interpretation?
The spread is your pay for taking default risk
Check your understanding
Sit with the ideas.
A BBB-rated bond yields 6% when 10-year Treasuries yield 4.5%. What is the credit spread?
Why: