Investment-Grade Corporate Bond Credit Spread History
Direct answer: Investment-grade credit spreads measure the extra yield investors demand to hold corporate bonds vs. equivalent-maturity Treasuries. The OAS (Option-Adjusted Spread) for the Bloomberg US Corporate Investment Grade Index averaged approximately 120-140 basis points historically. Spreads spiked to 620 bps during the 2008 financial crisis and 373 bps in March 2020 (COVID). As of late 2024, spreads were approximately 85-100 bps, historically tight, reflecting strong corporate fundamentals.
Investment-Grade OAS at Selected Dates (Basis Points)
| Date | IG OAS (bps) | Notes |
|---|---|---|
| Dec 2006 | 85 bps | Pre-crisis tight |
| Oct 2008 | 620 bps | Financial crisis peak |
| Dec 2009 | 180 bps | |
| Dec 2012 | 140 bps | |
| Dec 2016 | 120 bps | |
| Dec 2018 | 160 bps | |
| Dec 2019 | 93 bps | |
| Mar 2020 | 373 bps | COVID peak |
| Jun 2020 | 142 bps | Rapid recovery |
| Dec 2021 | 90 bps | |
| Dec 2022 | 130 bps | |
| Dec 2023 | 99 bps | |
| Sep 2024 | 85 bps | Historically tight |
Source: St. Louis Fed FRED: ICE BofA US Corporate Index OAS. Last verified: September 2026.
Frequently asked questions
What do tight credit spreads signal?
Tight credit spreads (below historical average of 120-140 bps for investment grade) signal: (1) strong corporate earnings and balance sheets (fewer default concerns); (2) high investor appetite for risk (investors willing to accept less extra yield to hold corporates over Treasuries); (3) generally favorable economic conditions. Tight spreads do not necessarily mean spreads will widen soon, but historically, periods of very tight spreads (below 100 bps) have preceded eventual spread widening. The asymmetry: spreads at 85 bps can widen to 600 bps in a crisis (loss of 500+ bps of yield advantage) but can only tighten by 85 bps more to zero.
How do credit spreads affect corporate bond returns?
Corporate bond total return has two components: (1) the Treasury yield (risk-free rate), and (2) the credit spread (extra yield). When spreads widen, corporate bond prices fall (beyond the Treasury price move). When spreads tighten, corporate bond prices rise (in addition to any Treasury price move). In 2020: Treasuries rallied strongly as the Fed cut rates; corporate bonds initially fell dramatically (spread widening), then recovered sharply (spread tightening). The Bloomberg US Corporate index returned +9.9% in 2020, benefiting from both rate declines and spread recovery after the March spike.
What is the difference between investment-grade and high-yield spreads?
Investment-grade bonds (BBB- or above) have OAS averaging 100-150 bps historically. High-yield bonds (BB+ and below, junk bonds) have OAS averaging 400-500 bps historically. The spread difference reflects default risk: investment-grade bonds default at approximately 0.1-0.2% annually; high-yield bonds default at 3-5% annually in normal years (spiking to 10-15% in recessions). During crises, high-yield spreads spike much more violently than investment-grade: high-yield OAS reached 1,900 bps in December 2008, vs. 620 bps for investment grade.