Definition
The extra yield investors demand to lend to a company instead of the US government.
The story
If a 10-year Treasury yields 4.9% and a company's 10-year bond yields 6.4%, the credit spread is 1.5 percentage points: the payment for taking on the risk that the company doesn't pay back. Spreads widen when investors get nervous about the economy and narrow when they feel confident.
Why markets watch it
Widening spreads are one of the classic signs of stress building in markets.
Connects to
High-yield bondsCredit ratingTreasury yieldRisk-on and risk-off
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms