Credit Spreads Signal

Corporate credit spreads as a funding-stress and risk appetite indicator.

As of 2026-01-24

Gemini Summary

Signal Summary:

  • The 1 Credit Spreads Signal is currently in a "NORMAL" regime as of 2025-12-31. This reflects stable corporate funding conditions, easing from a previous "EASY" regime. Conviction Band: Medium, Interpretation Confidence: High Confidence, Internal Conflict Flag: No.

Key Dynamics:

  • The High Yield Option-Adjusted Spread (HY OAS) is 2.92%, below the 3.5% threshold for "NORMAL" (1). The composite z-score (CSC_z) is -0.416, falling within the [-0.5, +0.5) range for "NORMAL" (1). This marks a transition from "EASY" in the prior two months.
  • Conditional Invalidation: The signal would transition to "TIGHTENING" if the composite z-score (CSC_z) rises above +0.5 (1).

Scenario Balance:

  • Base Case dominant: Credit spreads remain in the "NORMAL" regime, indicating a stable corporate funding environment.
  • Upside secondary: Spreads could revert to an "EASY" regime if risk appetite improves further, leading to additional tightening.
  • Downside residual: Spreads may widen into a "TIGHTENING" regime if financial stress or economic uncertainty increases.

Time Horizon & Aggregation:

  • Time Horizon: Cyclical (months). Credit spreads reflect business cycle dynamics and systemic liquidity shifts over a multi-month horizon (1).
  • Aggregation Weight Hint: Medium. The signal provides a coherent view, but its position near the "EASY" boundary suggests ongoing monitoring.

Macro Relevance:

  • Macro dimension informed: This signal primarily informs liquidity and financial stress conditions (1). It also gauges broader risk sentiment.
  • Cycle position: The "NORMAL" regime suggests mid-cycle financial conditions, where funding is neither excessively loose nor tight.
  • Typical interaction with other macro signals: The signal feeds into the 2 Financial Stress Index, interacting with 3 volatility and 4 liquidity to assess overall risk appetite (1).

Data & References:

  • ICE BofA US High Yield Index Option-Adjusted Spread (BAMLH0A0HYM2), latest as of 2025-12-31 (1).
  • ICE BofA US Corporate Master Option-Adjusted Spread (BAMLC0A0CM), latest as of 2025-12-31 (1).
  • The `HY_OAS` level and `CSC_z` for 2025-12-31 were most influential for the current state.
  • Additional public datasets: The `Market Volatility (VIX) Signal` (3) and `Federal Reserve Liquidity Composite Signal` (4) would improve depth.

Credit Spreads Chart

Signal chart

U.S. corporate credit spread dynamics.

Credit Spreads Table▸
HY_OAS IG_OAS hy_level_z hy_pct_rank hy_d3m_ann_z hy_d12m_z ig_level_z ig_pct_rank ig_d3m_ann_z ig_d12m_z CSC_z CSC_score CSC_regime
2023-02-28 4.22 1.30 0.000000 0.508333 -0.457836 0.102737 0.000000 0.520833 -0.544326 -0.140938 0.050158 22.993562 NORMAL
2023-03-31 4.58 1.45 0.275146 0.620833 -0.245269 0.652076 0.371279 0.733333 0.367904 0.302011 0.344564 28.446106 NORMAL
2023-04-30 4.53 1.41 0.236932 0.600000 0.506890 0.126340 0.272271 0.679167 0.809389 -0.161072 0.375606 29.021030 NORMAL
2023-05-31 4.69 1.42 0.359219 0.675000 0.872870 0.016302 0.297023 0.704167 0.636312 -0.120804 0.471762 30.801877 NORMAL
2023-06-30 4.05 1.30 -0.126109 0.462500 -0.658620 -1.785532 0.000000 0.525000 -0.687217 -0.825496 -0.233555 17.739042 NORMAL
2023-07-31 3.79 1.19 -0.298075 0.316667 -0.937428 -1.151852 -0.259896 0.341667 -0.974264 -0.803438 -0.349086 15.599348 NORMAL
2023-08-31 3.85 1.22 -0.221646 0.370833 -1.065770 -1.201552 -0.160888 0.404167 -0.833916 -0.644734 -0.314185 16.245745 NORMAL
2023-09-30 4.03 1.25 -0.053501 0.462500 0.141606 -1.286400 -0.074256 0.458333 -0.098108 -0.938422 -0.040883 21.307439 NORMAL
2023-10-31 4.42 1.32 0.244575 0.616667 1.110488 -0.458932 0.099008 0.587500 0.770847 -0.742917 0.369879 28.914957 NORMAL
2023-11-30 3.84 1.11 -0.168145 0.358333 0.160049 -0.769368 -0.408407 0.220833 -0.374717 -0.664572 -0.106459 20.092938 NORMAL
2023-12-31 3.39 1.04 -0.523952 0.100000 -0.785001 -1.221329 -0.569295 0.166667 -0.824378 -0.714167 -0.493144 12.931322 NORMAL
2024-01-31 3.59 1.02 -0.359728 0.183333 -1.036506 -0.721067 -0.606423 0.133333 -1.249057 -0.493284 -0.430469 14.092107 NORMAL
2024-02-29 3.29 1.00 -0.603074 0.070833 -0.609709 -0.830654 -0.668187 0.108333 -0.299774 -0.624156 -0.457565 13.590266 NORMAL
2024-03-31 3.15 0.94 -0.714167 0.033333 -0.142833 -1.123607 -0.819475 0.070833 -0.254525 -1.036904 -0.489122 13.005808 NORMAL
2024-04-30 3.18 0.91 -0.690361 0.050000 -0.422573 -1.025853 -0.895119 0.041667 -0.317407 -0.991898 -0.524624 12.348296 EASY
2024-05-31 3.20 0.88 -0.674491 0.058333 0.098108 -1.045157 -0.970762 0.016667 -0.343858 -1.028720 -0.456151 13.616450 NORMAL
2024-06-30 3.21 0.96 -0.670500 0.070833 0.343377 -0.592458 -0.769046 0.108333 0.396759 -0.640524 -0.305570 16.405287 NORMAL
2024-07-31 3.25 0.97 -0.648159 0.083333 0.359728 -0.291672 -0.743831 0.120833 0.608364 -0.378491 -0.247841 17.474466 NORMAL
2024-08-31 3.17 0.96 -0.712975 0.050000 0.158214 -0.291672 -0.769046 0.112500 0.661265 -0.397901 -0.307180 16.375484 NORMAL
2024-09-30 3.03 0.92 -0.806196 0.008333 -0.049962 -0.480043 -0.869904 0.075000 0.026451 -0.504655 -0.431726 14.068819 NORMAL
2024-10-31 2.88 0.86 -0.912546 0.008333 -0.324755 -0.752651 -0.995977 0.012500 -0.290957 -0.731490 -0.568206 11.541146 EASY
2024-11-30 2.74 0.83 -1.019671 0.008333 -0.399698 -0.477644 -1.030131 0.008333 -0.396759 -0.397901 -0.585918 11.213109 EASY
2024-12-31 2.92 0.82 -0.862721 0.025000 0.108252 -0.118492 -1.026659 0.008333 -0.242817 -0.287650 -0.416047 14.359197 NORMAL
2025-01-31 2.68 0.82 -1.028164 0.008333 -0.016654 -0.346360 -0.997073 0.012500 0.026980 -0.247975 -0.497003 12.859862 NORMAL
2025-02-28 2.87 0.88 -0.857045 0.025000 0.571754 0.015191 -0.818613 0.054167 0.533972 -0.029757 -0.269491 17.073496 NORMAL
2025-03-31 3.55 0.97 -0.307460 0.266667 1.465119 0.530181 -0.588018 0.183333 1.096047 0.271810 0.193163 25.642085 NORMAL
2025-04-30 3.94 1.09 0.003843 0.508333 2.590759 0.756057 -0.299774 0.316667 1.770538 0.573820 0.602499 33.223204 TIGHTENING
2025-05-31 3.32 0.92 -0.465034 0.187500 1.143508 0.370888 -0.680159 0.120833 0.498537 0.294139 0.031462 22.647293 NORMAL
2025-06-30 2.96 0.86 -0.731651 0.050000 -0.714692 0.132520 -0.809389 0.041667 -0.398563 0.020595 -0.434317 14.020829 NORMAL
2025-07-31 2.86 0.79 -0.776230 0.025000 -1.590190 0.037377 -0.958780 0.008333 -1.563592 -0.061785 -0.654204 9.948420 EASY
2025-08-31 2.84 0.81 -0.736138 0.025000 -0.579562 0.078153 -0.895635 0.016667 -0.427726 0.030893 -0.440686 13.902869 NORMAL
2025-09-30 2.80 0.76 -0.761522 0.025000 0.032119 0.155931 -0.995150 0.008333 -0.380482 0.020595 -0.362904 15.343435 NORMAL
2025-10-31 2.94 0.80 -0.654600 0.075000 0.546016 0.371246 -0.856496 0.025000 0.345893 0.226547 -0.174670 18.829637 NORMAL
2025-11-30 2.92 0.82 -0.680035 0.070833 0.546282 0.459462 -0.762020 0.050000 0.354995 0.329522 -0.156518 19.165815 NORMAL
2025-12-31 2.81 0.79 -0.750255 0.033333 0.357422 0.246272 -0.797125 0.020833 0.473966 0.288332 -0.238711 17.643558 NORMAL
2026-01-31 2.64 0.73 -0.864827 0.008333 -0.366828 0.297732 -0.899321 0.008333 -0.269796 0.164761 -0.422313 14.243161 NORMAL
Methodology: Credit Spreads Signal