Investment grade and high yield corporate bond spreads over Treasuries. Credit spreads have preceded every US recession in the last 50 years.
The yield difference between corporate bonds and risk-free Treasuries. Wider spreads mean higher perceived default risk. They're the bond market's real-time assessment of financial stress.
IG spreads above 200bp signal stress. HY spreads above 600bp signal serious risk. Above 800bp has historically coincided with recessions. Watch for rapid widening.
Credit spreads often lead equity markets. When spreads widen but stocks haven't fallen yet, the bond market is warning you. Smart money watches credit before equities.
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