High Yield and Corporate Credit Spreads

Below we highlight historical charts of the Merrill Lynch High Yield and Corporate Credit Spread indices since the end of 1996.  These indices measure the difference between yields on comparable length Treasuries and high yield and corporate bonds.  The current yield spread between corporates and comparable Treasuries is 540 basis points (bps), while the spread for high yield bonds is 1,544 bps.  At their peak, high yield bonds were yielding 21.82% more than comparable Treasuries, so the spread is down 29.24% from its high.  Corporate spreads are down 17.68% from their peak.  While it's a great sign to see spreads come in, the charts show that they are still extremely high from a historical perspective.

 

Comments

[Macstibs]

Your charts should go back more than 12 years. Arguably the credit cycle is normally longer than that.

[Paul Teetor]

Thank you very much for tracking important spread. I've been trading this one by buying closed-end junk bond funds and selling 10-Treasury calls against them. It's working quite well. The yield on the junk is about 14%, so they are spinning off cash. The short call is profiting through time-decay. And the position has a growing, unrealized profit because the spread is gradually reverting. I think there is more juice remaining is this one.

[butwhatdoIknow?]

Doesn't this reflect the Fed's purchase of Treasuries--i.e., setting a de facto low rate for US bonds will make the spreads look historically wide since in the absence of the Fed purchase of Treasuries the rates for govies would be much higher?

I hate to be the one to say it, but historical spread data may not matter much anymore in this new era. . .

[Roowns]

Every spread/bond/gold chart looks like S&P 500 upside down.
Any regional stock index looks the same.

I don't see any relevance in looking at same chart over and over and over again !!!

[custom research papers]

thanx, i really found useful information in this post. i am sure this would be helpful for me.

[writing an essay]

i agree with Macstibs's comments

[danial]

good blog

[Account Deleted]

grate to see informative

[College application essay]

Excellent work.

[College Entrance Essay]

Nice work

[critical analysis essay]

good one

[DISSERTATION EXPRESS]

good one

[ESSAY-WRITING-ONLINE]

fine piece of writing.

[Generic Viagra]

Thank you so much. Very informative. I think I am not an expert on economy, but still, I think I can use some of this info for my own benefit.