Key points
- Rated by Moody's, S&P, and Fitch.
- Investment-grade (BBB and above) vs high-yield (junk).
- Spreads widen in recessions.
Example
If a BBB bond yields 6.0% while the matched Treasury yields 4.5%, the 150 bps spread reflects compensation for corporate credit risk.
In history
In late 2008, investment-grade spreads peaked above 600 bps. In March 2020 they reached about 375 bps before narrowing once the Fed announced it would buy corporate bonds.
Related terms