Key points
- Tighter spreads indicate risk appetite.
- Wider spreads signal credit stress or recession fears.
- High-yield spreads are more volatile than investment-grade.
Example
A move in HY OAS from 350 bps to 500 bps in a month often signals rising default fears and tightening financial conditions.
In history
US high-yield spreads blew out above 1,000 bps in March 2020 and narrowed below 400 bps by late 2021 as stimulus restored risk appetite.
Related terms