---
title: "Fixed Income and Credit Indicators"
description: "Yield spreads, inflation expectations, and credit market indicators including treasury spreads, breakeven inflation rates, & high-yield option-adjusted spreads."
canonical: https://www.getswoopr.com/indicators/fixed-income-and-credit/
source: "Swoopr Investment: https://www.getswoopr.com"
---

## Direct Answer



Yield spreads, inflation expectations, and credit market indicators including treasury spreads, breakeven inflation rates, and high-yield option-adjusted spreads.





      


# Fixed Income and Credit Indicators



> Fixed income and credit indicators measure the price of time and the price of default risk: the yield of a bond and how it responds to rate changes (duration, convexity, the yield measures), the shape of the Treasury curve (term spreads, real yields, breakevens, the term premium) and the extra yield credit pays over Treasuries (option-adjusted, G-, I- and Z-spreads, CDS spreads, distance to default). They are read for the market's expectations of growth, inflation and credit stress.

## What do Fixed Income and Credit indicators have in common?

Every indicator in this category comes from the arithmetic of a bond: a fixed stream of payments, a price, and the single rate that discounts the payments to the price. Yield to maturity, current yield, yield to call and yield to worst are different conventions for stating that rate. Duration and convexity describe how the price moves when the rate moves. Everything else in the category is a difference between two such rates: between two maturities, between a nominal and an inflation-indexed bond, or between a corporate bond and the Treasury that matches it.

The category divides into three groups. The bond mathematics (duration, modified and effective duration, Macaulay duration, convexity, spread duration, the yield measures, par and forward rates) is used to size a position's rate exposure. The Treasury curve measures (the 2s10s, 3m10y, 2s30s and 5s30s spreads, yield curve slope, real yields, breakeven inflation, the five-year five-year forward, the term premium) are read as the market's growth and inflation expectations, and an inverted curve has preceded every U.S. recession since the 1960s with a lead of several quarters. The credit measures (investment-grade and high-yield option-adjusted spreads, G-, I- and Z-spreads, CDS and CDS index spreads, default probability, distance to default, recovery-implied spreads, the TED, LIBOR-OIS and SOFR-OIS spreads) price default and funding stress.

What they share is that the data is published daily by the Treasury, the Federal Reserve and the index providers, and that most of the series are available for decades, so an extreme can be judged against a long record. They also share a dependence on the risk-free benchmark: a credit spread is only as meaningful as the Treasury yield it is measured against, and an option-adjusted spread depends on a prepayment or call model that differs between providers.

## How do you choose a Fixed Income and Credit indicator?

- For a position's rate risk, use modified duration for an option-free bond and effective duration for a callable, puttable or mortgage bond, and add convexity when the rate move is large
- For the economy, read the 3m10y or 2s10s spread for the recession signal and the five-year five-year forward for inflation expectations; the two answer different questions
- For credit stress, read the high-yield option-adjusted spread for the cycle and the investment-grade spread for funding conditions, and confirm either with the CDS index, which trades when cash bonds do not
- Use the SOFR-OIS spread, not the TED spread, for bank funding stress since LIBOR's end; the TED series is discontinued
- Match the spread convention to the bond: a Z-spread for a plain bond, an option-adjusted spread for one with embedded options, and a G-spread only for a quick comparison against the nearest Treasury

## Fixed Income and Credit indicators at a glance

| Indicator | What it measures | How it is read |
| --- | --- | --- |
| [10-Year Real Yield](https://www.getswoopr.com/indicators/fixed-income-and-credit/10-year-real-yield/) | The yield on a 10-year Treasury after removing expected inflation. | A higher real yield means investors are paid more above expected inflation to lend for ten years, which tightens financial conditions and weighs on long-duration assets. |
| [2s30s Treasury Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/2s30s-treasury-spread/) | The yield on the 30-year Treasury minus the yield on the 2-year Treasury, expressed in basis points. | A positive, steeper spread means long yields sit well above short yields. |
| [3m10y Treasury Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/3m10y-treasury-spread/) | The yield on the 10-year Treasury minus the yield on the 3-month Treasury bill. | Positive values are a normal upward-sloping curve; negative values mean short rates exceed long rates, a condition called inversion that has often preceded economic slowdowns but gives no timing guarantee. |
| [5-Year 5-Year Forward Inflation Expectation](https://www.getswoopr.com/indicators/fixed-income-and-credit/5-year-5-year-forward-inflation-expectation/) | The market-implied average annual inflation rate expected over the five-year period that begins five years from today. | Because it strips out the near-term inflation path, a stable reading is commonly taken as a sign that long-run expectations are anchored, while a sustained rise suggests markets are repricing longer-term inflation risk. |
| [5-Year Breakeven Inflation](https://www.getswoopr.com/indicators/fixed-income-and-credit/5-year-breakeven-inflation/) | The yield gap between a 5-year nominal Treasury and a 5-year Treasury Inflation-Protected Security. | A higher breakeven means the market prices more inflation over the next five years; a falling breakeven suggests lower expected inflation or weaker demand for inflation protection. |
| [5-Year Real Yield](https://www.getswoopr.com/indicators/fixed-income-and-credit/5-year-real-yield/) | The inflation-adjusted yield on a 5-year Treasury, observed as the 5-year TIPS yield. | Higher real yields raise the return available without inflation risk and tend to pressure rate-sensitive assets; a real yield near or below zero means holders earn little or nothing after inflation. |
| [5s30s Treasury Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/5s30s-treasury-spread/) | The 30-year Treasury yield minus the 5-year Treasury yield, in basis points. | Widening (steepening) means long yields are rising relative to intermediate yields, often tied to term premium or growth and inflation expectations; narrowing (flattening) signals the opposite. |
| [CDS Index Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/cds-index-spread/) | The annual premium, in basis points, for buying protection on an entire standardized credit default swap index such as CDX or iTraxx. | A wider index spread means the market demands more compensation for credit risk; a tighter spread means less. |
| [CDS Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/cds-spread/) | The annual premium, in basis points of notional, that a protection buyer pays on a single-name credit default swap. | A wider CDS spread signals that the market sees higher default risk or loss severity for the issuer; a narrowing spread signals improving credit perception. |
| [Convexity](https://www.getswoopr.com/indicators/fixed-income-and-credit/convexity/) | The curvature of a bond's price-yield relationship: the second derivative of price with respect to yield, divided by price. | Higher convexity means a bond gains more when yields fall than it loses when yields rise by the same amount. |
| [Credit Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/credit-spread/) | The additional yield a corporate or other credit-risky bond pays over a benchmark government bond of similar maturity. | Wider spreads indicate that investors require more compensation for credit risk, often during stress; tighter spreads indicate confidence. |
| [Current Yield](https://www.getswoopr.com/indicators/fixed-income-and-credit/current-yield/) | A bond's annual coupon income divided by its current market price. | A current yield above the coupon rate indicates the bond trades below par, and below the coupon rate indicates a premium. |
| [Default Probability](https://www.getswoopr.com/indicators/fixed-income-and-credit/default-probability/) | The estimated probability that an issuer defaults within a given horizon. | Higher values mean greater perceived chance of default over the horizon. |
| [Distance to Default](https://www.getswoopr.com/indicators/fixed-income-and-credit/distance-to-default/) | A structural credit measure from the Merton model: how many standard deviations a firm's asset value sits above its debt obligation at the horizon. | A higher distance to default means the asset value would need a larger fall to hit the default point; values near zero or below indicate elevated modeled default risk. |
| [Duration](https://www.getswoopr.com/indicators/fixed-income-and-credit/duration/) | A measure of a bond's price sensitivity to changes in yield, stated in years. | Higher duration means more interest-rate risk: a duration of 6.5 implies roughly a 6.5% price fall for a 1 percentage point rise in yield. |
| [Effective Convexity](https://www.getswoopr.com/indicators/fixed-income-and-credit/effective-convexity/) | The curvature of a bond's price response to yield changes measured by repricing the bond under small upward and downward shifts in the benchmark curve. | Positive effective convexity means price gains from falling yields exceed losses from rising yields. |
| [Effective Duration](https://www.getswoopr.com/indicators/fixed-income-and-credit/effective-duration/) | A duration estimate obtained by repricing a bond under small parallel downward and upward shifts of the benchmark curve. | It estimates the percentage price change per one point change in yield, including the effect of embedded options. |
| [Forward Rate](https://www.getswoopr.com/indicators/fixed-income-and-credit/forward-rate/) | The interest rate for a future period implied by today's spot rates. | Forward rates are the market-implied breakevens for future short rates; if realized rates end up above the forward, holding the short bond and rolling would have beaten the long bond. |
| [G-Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/g-spread/) | A bond's yield minus the yield of a government bond of the same maturity, with the government yield interpolated if no exact match exists. | A wider G-spread implies more compensation over the risk-free curve for credit, liquidity and optionality. |
| [I-Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/i-spread/) | A bond's yield minus the interpolated swap rate of the same maturity. | A wider I-spread means more yield over the swap curve, a benchmark that reflects bank funding conditions. |
| [Investment-Grade OAS](https://www.getswoopr.com/indicators/fixed-income-and-credit/investment-grade-oas/) | The option-adjusted spread of an investment-grade corporate bond index over the benchmark curve, with the value of embedded options removed. | Widening investment-grade OAS suggests investors demand more compensation for corporate credit risk; narrowing suggests confidence. |
| [LIBOR-OIS Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/libor-ois-spread/) | The difference between 3-month LIBOR and the matching-term overnight index swap (OIS) rate. | A wider spread signaled greater concern about bank credit risk and funding availability, while a narrow spread signaled calm interbank markets. |
| [Macaulay Duration](https://www.getswoopr.com/indicators/fixed-income-and-credit/macaulay-duration/) | The present-value-weighted average time, in years, until a bond's cash flows are received. | It is always at or below maturity and equals maturity for a zero-coupon bond. |
| [Modified Duration](https://www.getswoopr.com/indicators/fixed-income-and-credit/modified-duration/) | Macaulay duration adjusted for the bond's yield and compounding frequency, giving the approximate percentage price change for a 1 percentage point change in yield. | A modified duration of 7.3 means a bond's price falls about 7.3% if its yield rises by 1 percentage point, other things equal. |
| [Mortgage OAS](https://www.getswoopr.com/indicators/fixed-income-and-credit/mortgage-oas/) | The option-adjusted spread on mortgage-backed securities or a mortgage index: the spread over the benchmark curve after removing the value of homeowners' prepayment option, estimated with a prepayment model and simulated interest-rate paths. | A wider mortgage OAS means more compensation for credit, liquidity and model risk once the prepayment option is accounted for. |
| [Municipal/Treasury Ratio](https://www.getswoopr.com/indicators/fixed-income-and-credit/municipal-treasury-ratio/) | The yield on a tax-exempt municipal bond divided by the yield on a Treasury of the same maturity, usually shown as a percentage. | A higher ratio means municipals yield more relative to Treasuries and look cheaper, while a lower ratio means they look richer. |
| [Nominal Yield](https://www.getswoopr.com/indicators/fixed-income-and-credit/nominal-yield/) | A bond's stated annual coupon rate: the yearly interest payment as a percentage of face (par) value. | It describes the bond's cash coupon, not the return an investor earns: buying below or above par makes the current yield and yield to maturity differ. |
| [Option-Adjusted Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/option-adjusted-spread/) | The constant spread added to the benchmark curve (across simulated interest-rate paths) that makes a bond's model price equal its market price, after accounting for embedded options such as calls or prepayments. | OAS is the spread for credit and liquidity risk once option effects are stripped out, so it allows comparing bonds with and without options. |
| [Par Yield](https://www.getswoopr.com/indicators/fixed-income-and-credit/par-yield/) | The coupon rate at which a bond of a given maturity would price exactly at par, derived from the spot (zero-coupon) curve. | The par yield is the coupon a new bond would need to carry to sell at face value, so it is the natural rate for new-issue pricing. |
| [Real Yield](https://www.getswoopr.com/indicators/fixed-income-and-credit/real-yield/) | A bond yield adjusted for inflation: the return above inflation an investor expects to earn. | A positive real yield means the investor earns purchasing power; a negative real yield means inflation outpaces the nominal return. |
| [Recovery Rate Implied Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/recovery-rate-implied-spread/) | The credit spread implied by an assumed default probability and recovery rate: the compensation per year needed to cover expected credit loss. | Holding default probability fixed, a lower recovery rate raises the spread needed to cover losses. |
| [SOFR-OIS Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/sofr-ois-spread/) | The difference between a SOFR-based rate and an overnight index swap rate of matching term. | A widening spread can indicate funding pressure or heavy demand for cash, while a narrow spread indicates smooth markets. |
| [Spread Duration](https://www.getswoopr.com/indicators/fixed-income-and-credit/spread-duration/) | The approximate percentage change in a bond's price for a 1 percentage point change in its credit spread, holding the benchmark curve unchanged. | A higher spread duration means a bond or portfolio loses more value when credit spreads widen. |
| [Swap Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/swap-spread/) | The difference between the fixed rate on an interest rate swap and the yield on a Treasury of the same maturity. | Historically positive because swaps carried bank credit risk, the spread can be negative, which indicates Treasuries yield more than swaps because of heavy Treasury supply or balance sheet constraints. |
| [Tax-Equivalent Yield](https://www.getswoopr.com/indicators/fixed-income-and-credit/tax-equivalent-yield/) | The pre-tax yield a taxable bond must offer to match the after-tax yield of a tax-exempt bond. | If a taxable bond yields more than the tax-equivalent yield, it provides a higher after-tax return than the municipal bond, other things equal. |
| [TED Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/ted-spread/) | The difference between the 3-month USD LIBOR rate and the 3-month Treasury bill rate. | A wider TED spread meant banks were seen as riskier relative to the U.S. |
| [Term Premium](https://www.getswoopr.com/indicators/fixed-income-and-credit/term-premium/) | The extra yield investors require to hold a long-term bond instead of rolling over short-term bonds, over and above the expected average of future short rates. | A rising term premium means investors need more compensation to hold duration, steepening the curve independent of policy expectations. |
| [Treasury Term Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/treasury-term-spread/) | The difference between a longer-maturity and a shorter-maturity Treasury yield, commonly the 10-year minus the 2-year. | A positive spread is a normal upward-sloping curve, a falling spread flattens it, and a negative value is inversion. |
| [Yield Curve Slope](https://www.getswoopr.com/indicators/fixed-income-and-credit/yield-curve-slope/) | The steepness of the yield curve across maturities, commonly measured as the yield difference between a long and a short maturity divided by the maturity gap. | A positive slope means yields rise with maturity, a slope near zero is a flat curve, and a negative slope means inversion. |
| [Yield to Call](https://www.getswoopr.com/indicators/fixed-income-and-credit/yield-to-call/) | The annualized yield on a callable bond assuming it is redeemed by the issuer at the call price on the first call date. | For a bond trading above its call price, yield to call is below yield to maturity, showing the return if the issuer calls. |
| [Yield to Maturity](https://www.getswoopr.com/indicators/fixed-income-and-credit/yield-to-maturity/) | The single annualized discount rate that makes the present value of a bond's remaining cash flows equal to its price, assuming it is held to maturity and all payments are made as scheduled. | It is the standard way to compare bonds of different coupons and prices: a bond priced below par has a yield above its coupon rate, and one above par has a yield below it. |
| [Yield to Worst](https://www.getswoopr.com/indicators/fixed-income-and-credit/yield-to-worst/) | The lowest yield an investor can receive on a bond without the issuer defaulting, taken across yield to maturity and the yield to each possible call or put date. | It is the minimum return the investor can expect if the issuer acts in its own interest, which makes it a prudent basis for comparing callable bonds. |
| [Z-Spread](https://www.getswoopr.com/indicators/fixed-income-and-credit/z-spread/) | The constant spread that, when added to each point of the benchmark spot (zero) curve, makes the present value of a bond's cash flows equal its market price. | A higher Z-spread means more compensation over the benchmark curve for credit, liquidity and other risks. |

Each row is the opening sentence of that indicator's own definition and reading, so the table says exactly what the profile says.






## Guides in This Category



- [10-Year Breakeven Inflation](https://www.getswoopr.com/indicators/fixed-income-and-credit/10-year-breakeven-inflation/)
- [2s10s Treasury Spread (2s10s)](https://www.getswoopr.com/indicators/fixed-income-and-credit/2s10s-treasury-spread/)
- [High-Yield OAS (HY OAS)](https://www.getswoopr.com/indicators/fixed-income-and-credit/high-yield-oas/)





## What limits do Fixed Income and Credit indicators share?

Every spread depends on the benchmark curve and on the model used to strip out embedded options, so two providers publish different option-adjusted spreads for the same index. The yield curve's recession record is strong but its lead time has ranged from six months to two years, and the curve can invert because of central bank purchases rather than growth expectations. Breakevens contain an inflation risk premium and a liquidity premium that move independently of expected inflation, duration is a linear approximation that convexity only partly repairs, and default probabilities from structural models assume the equity market has priced the firm's assets correctly.

## Frequently Asked Questions

What is the difference between duration and convexity?

Duration is the first-order estimate of how much a bond's price changes for a small change in yield, roughly the percentage price change per percentage point of yield. Convexity is the second-order correction: because the price-yield relationship is curved, duration overstates the loss when yields rise and understates the gain when they fall, and convexity measures the size of that curvature.

What does an inverted yield curve mean?

An inverted curve means a short-maturity Treasury yields more than a long one, most often measured by the 3-month against the 10-year or the 2-year against the 10-year. It has preceded every U.S. recession since the 1960s with a lead of several quarters, because it means the market expects short rates to fall, which usually means it expects the central bank to respond to a slowdown.

What is an option-adjusted spread?

An option-adjusted spread is the extra yield a bond pays over the Treasury curve after removing the value of any embedded option, such as an issuer's right to call the bond or a homeowner's right to prepay a mortgage. It is the spread used for the ICE BofA corporate and high-yield indexes on FRED, and it depends on the prepayment or call model the provider uses.

What is breakeven inflation?

Breakeven inflation is the difference between the yield on a nominal Treasury and the yield on an inflation-indexed Treasury of the same maturity. It is the average inflation rate at which the two would pay the same, so it is read as the market's inflation expectation, though it also contains a risk premium for inflation uncertainty and a liquidity premium for the less-traded indexed bond.


      



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