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Spreads & Regime

Where does the price of credit risk sit?
Credit Spreads

Where IG & HY option-adjusted spreads sit — the price of bearing US corporate credit risk over Treasuries.

How ICE BofA OAS, IG composite (BAMLC0A0CM) + HY composite (BAMLH0A0HYM2), in bp, with a +1σ band vs own history.Formula OAS = corporate yield − matched Treasury curve (option-adjusted)Source FRED (ICE BofA)

credit_spreads

How to read Tight = risk-on / complacent, wide = stress; judge vs its own multi-decade history (percentile).

A spread is NOT pure expected default — it = expected loss + taxes + risk premium + liquidity premium, and models explain <half its variation (the 'credit spread puzzle'). Don't read OAS as the market's default forecast.

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