High-yield spread: what the market charges for default risk
The spread measures the gap between the yield of US high-yield bonds and Treasuries of the same maturity. It widens when investors price in defaults. The bond market is larger than the stock market and its investors take fright earlier: in 2007 the spread widened from June, stocks peaked in October.
History since 2023
What it says today
Risky companies borrow at almost the government's rate. Confidence at its peak. 13 % of the history sits at or below today's value.
Risky companies borrow at almost the government's rate. Confidence at its peak.
A normal premium for risk. The usual long-term level.
Investors start counting which companies will not repay. Often the first sign of trouble.
The market fears a wave of defaults. February 2016 (oil), March 2020.
Companies cannot borrow. December 2008 reached almost 22 %.
What it measures
The ICE BofA US High Yield index holds US corporate bonds rated below investment grade. The option-adjusted spread (OAS) says how many percentage points above Treasuries investors demand for the risk that a company does not pay. When it widens, financing gets dearer for the most indebted companies and their stocks tend to fall first.
Extremes: 21.8 % in December 2008, 10.9 % on 23 March 2020, 8.9 % in February 2016 during the oil crash. Lows around 2.5 % in June 2007 and again in 2024 to 2025.
How to read it
Watch direction and speed. A widening of one percentage point within a month is a warning even if the level stays in the normal band. A spread under 3 % does not mean safety but that the market charges nothing for risk; from such a level it has historically moved only one way.
The gap between the spread and the VIX is useful: when the VIX jumps but the spread does not move, it is an equity shock without a credit dimension, as in February 2018 or August 2024. When both rise, the market is repricing default risk and the decline tends to last longer.
When it failed
In 2015 and 2016 the spread climbed to 8.9 % because half the high-yield index was energy companies hit by oil under 30 dollars. No recession came and the S&P 500 added 10 % by the end of 2016. The spread rightly warned of defaults in one sector, not of the economy.
In 2011 it jumped to almost 9 % on the euro area debt crisis while US companies posted record profits. The spread is a global measure of risk appetite, not just an American one.
How to read market indicators
The seven indicators in the Indicators section say how expensive, frightened or tired the market as a whole is. What the bands mean, why none of them times the market, and how to combine them with the Fair Price Index.
Learn moreTerms in the glossary
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About Bulios BlackMethod and source
- Source: ICE BofA US High Yield Index Option-Adjusted Spread via FRED (series BAMLH0A0HYM2).
- Since 2026 FRED publishes only the last three years of the ICE BofA indices (licensing), so the chart lacks the longer history; the 2008, 2016 and 2020 peaks are in the text.
- Bands: under 3 % calm, 3 to 4 % normal, 4 to 6 % nervous, 6 to 9 % stress, above 9 % crisis.
Source: ICE BofA via FRED (Federal Reserve Bank of St. Louis) · Updated September 16, 2026
Frequently asked questions
Other indicators
The indicators describe the market as a whole from public data. They say where the market stands against its history, not what it does next month, and each of them has failed before. They are not investment advice. Learn more