Quality Ladder & Dispersion

How does the market price each notch of quality?

IG Spreads by Rating

The investment-grade quality ladder — how spreads step up AAA→A→BBB.

How ICE BofA per-rating OAS (AAA/A/BBB) + IG composite, bp.Source FRED (ICE BofA)

ig_spreads_by_rating—

How to read The gap between buckets = what the market charges per notch of quality inside IG; BBB widening fastest = IG-edge stress.

Same spread-puzzle caveat: a spread is NOT pure expected default — it = expected loss + taxes + risk premium + liquidity premium, and models explain <half its variation.

HY Spreads by Rating

The high-yield quality ladder — BB→B→CCC.

How ICE BofA per-rating OAS (BB/B/CCC) + HY composite, bp.Source FRED (ICE BofA)

hy_spreads_by_rating—

How to read CCC pulling away from BB = distress concentrating in the tail.

Same spread-puzzle caveat: a spread is NOT pure expected default — it = expected loss + taxes + risk premium + liquidity premium, and models explain <half its variation.

Ladder Dispersion

How WIDE the whole quality stack trades — cross-sectional dispersion across the six rating buckets.

How Per-date standard deviation across AAA/A/BBB/BB/B/CCC OAS, in bp.Source FRED (ICE BofA), computed

credit_ladder_dispersion—

How to read High dispersion = the market discriminating sharply across quality (idiosyncratic / late-cycle); low = compression (everything trades alike). A DISTINCT dimension from the index level — in 2025 the index tightened while dispersion widened.

This is cross-bucket (ladder) dispersion, NOT true within-bucket bond-level dispersion (that needs constituent data, which is paid).

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