Baa spread over the 10-year Treasury
Credit of ordinary companies. Credit.
Updated
What is it?
The same, but for solid mid-quality companies: how much more interest they pay than the government.
Yield on Moody's Baa corporate bonds minus the 10-year Treasury yield. A gauge of credit risk with history going back to 1986.
Why does it matter?
If it rises, even ordinary companies find it more expensive to raise money.
When should it be a concern?
It is a concern when even ordinary companies are paying more to borrow. Crisis Monitor turns each reading into a score from 0 to 100 using these bands:
| Situation | Value | What does it mean? |
|---|---|---|
| Calm | ≤ 1.60% | Score 0: no stress |
| Watch | ≥ 2.20% | Score 33: starts to draw attention |
| Stress | ≥ 3.00% | Score 66: risk zone |
| Extreme | ≥ 5.00% | Score 100: like in the worst crises |
Between one band and the next, the score is interpolated.
Baa–10Y Treasury spread in past crises
Since January 1990, its weekly low was 1.27% (Dec 1994) and its high was 6.16% (Dec 2008). The typical level (the median) is 2.14%.
| Crisis | At the start | High during the crisis |
|---|---|---|
| 1990-91 recession | 1.72% | 2.43% (Jan 1991) |
| Russia and LTCM 1998 | 1.68% | 2.65% (Oct 1998) |
| Dot-com bubble and 2001 recession | 2.05% | 3.90% (Oct 2002) |
| Global Financial Crisis 2007-09 | 1.97% | 6.16% (Dec 2008) |
| European debt crisis 2011 | 2.59% | 3.32% (Sep 2011) |
| 2015-16 market scare | 2.74% | 3.53% (Feb 2016) |
| Q4 2018 sell-off | 1.87% | 2.29% (Dec 2018) |
| COVID panic 2020 | 2.05% | 4.04% (Mar 2020) |
| 2022 bear market | 1.85% | 2.42% (Jul 2022) |
Weekly data. Crises that do not appear predate the series.
How does Crisis Monitor use it?
- Area: Credit and financial conditions (30% of the index). Whether companies and banks find it hard to borrow. When credit dries up, the trouble starts.
- When does it move? Usually warns early.
- Data frequency: daily.
- Quick alarm: No.
The index combines 17 indicators. See the methodology to learn how it is calculated.
Data source
FRED, Federal Reserve Bank of St. Louis (BAA10Y). Data may arrive late and does not constitute financial advice.
Frequently asked questions
What is the Baa spread?
It is the difference between the yield on Moody's Baa-rated corporate bonds, the lowest rating within “investment grade”, and the yield on the 10-year US Treasury bond.
How does it differ from the high-yield spread?
The Baa measures solid mid-quality companies and high yield measures the riskiest ones. When even the Baa rises sharply, the stress is no longer limited to weak companies.