High-Yield (Junk Bond) Credit Spread History
Direct answer: High-yield (HY) credit spreads measure extra yield for below-investment-grade bonds (junk bonds) vs. Treasuries. The ICE BofA High Yield OAS averaged approximately 500-550 basis points historically. Spreads peaked at 1,900 bps during the 2008 financial crisis. As of late 2024, spreads were approximately 280-320 bps, well below historical average, reflecting a benign default environment and strong investor risk appetite.
High-Yield OAS at Selected Dates (Basis Points)
| Date | HY OAS (bps) | Notes |
|---|---|---|
| Dec 2006 | 250 bps | Pre-crisis tight |
| Oct 2008 | 1,900 bps | Financial crisis peak |
| Dec 2009 | 720 bps | |
| Dec 2012 | 500 bps | |
| Dec 2015 | 740 bps | Energy sector distress |
| Dec 2016 | 400 bps | |
| Dec 2018 | 533 bps | |
| Dec 2019 | 336 bps | |
| Mar 2020 | 1,100 bps | COVID peak |
| Jun 2020 | 604 bps | Fed backstop effect |
| Dec 2021 | 283 bps | |
| Dec 2022 | 474 bps | |
| Dec 2023 | 322 bps | |
| Sep 2024 | 295 bps | Below historical average |
Source: St. Louis Fed FRED: ICE BofA US High Yield Index OAS. Last verified: September 2026.
Frequently asked questions
What causes high-yield spread spikes?
High-yield spreads spike when investors fear rising default rates. Triggers include: recessions (reducing corporate revenues and ability to service debt), credit market seizures (2008 liquidity crisis made HY bonds nearly unsellable), sector-specific distress (energy sector HY bonds spiked in 2015-2016 when oil prices collapsed, threatening leveraged energy producers), or systemic panic (March 2020 COVID, where every risk asset sold simultaneously). Recovery is typically rapid once the triggering crisis passes: HY OAS went from 1,100 bps in March 2020 to 400 bps by November 2020 as the Fed backstopped credit markets and vaccines became likely.
What default rate should high-yield investors expect?
High-yield bond default rates (par-weighted) have averaged approximately 3-4% annually since 1983, with spikes to 10-15% during recessions (2009: approximately 14%; 2020: approximately 8%). Recovery rates on defaulted bonds average approximately 40 cents on the dollar. Expected loss from defaults: approximately 3% default rate x 60% loss given default = approximately 1.8% expected annual credit loss. The HY spread (500 bps historically) minus expected default losses (180 bps) leaves approximately 320 bps of compensation for liquidity risk, uncertainty, and mark-to-market volatility. That excess spread is why HY has historically outperformed Treasuries over long periods.
How did the Fed affect high-yield markets in 2020?
In March 2020, for the first time ever, the Federal Reserve announced it would purchase high-yield ETFs (specifically fallen angels -- investment-grade bonds recently downgraded to HY). This was announced April 9, 2020, via the Secondary Market Corporate Credit Facility. The announcement alone was enough: HY spreads began narrowing immediately even before actual purchases began (the Fed ultimately purchased relatively small amounts). The signal that the Fed would backstop the credit market fundamentally changed HY market dynamics. HY spreads went from 1,100 bps in mid-March to 604 bps by June, one of the fastest spread recoveries in history.