High Yield Spreads

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Includes: HYG, IEF, JNK, TLH, TLT
by: Bespoke Investment Group

High-yield bond spreads are used by many investors and economists to gauge the health of markets and the economy. During the financial crisis, the spread (the difference between junk-bond yields and comparable Treasuries) widened out to more than 2000 basis points based on BOA/ML numbers, which meant high-yield bonds had yields more than 20 percentage points higher than Treasuries! During the 2009/early 2010 recovery, spreads came in just as fast as they spiked, and at least for now, spreads have actually remained fairly stable even as global equity markets fret about double-dip possibilities. Spreads are currently where they were back in June of 2008.