Valuation

What credit has DELIVERED (trailing return) and what the market is currently PRICING (implied default).

How Trailing 1y total return of the ICE BofA IG/HY total-return indices (BAMLCC0A0CMTRIV / BAMLHYH0A0HYM2TRIV), %, left axis; market-implied default rate via the credit triangle, %/yr, right axis.Formula implied default ≈ OAS / (1 − Recovery), Recovery = 40%Source FRED (ICE BofA), computed

How to read Higher implied default = the market pricing more credit risk; trailing return = realized past-year performance.

🚨 the implied default rate is RISK-NEUTRAL / breakeven — 'what the market is currently pricing,' NOT a forecast; it embeds liquidity + risk premia and plugging OAS into the triangle is desk-loose. (The spread-cushion/breakeven read is intentionally deferred — no free duration series.)