Below we highlight a one-year chart of the CDX North American Investment Grade Credit index that measures credit default swap prices for a number of US companies.
During the Bear Stearns collapse in mid-March, the default risk index spiked sharply, as investors were forced to pay more to insure debt since uncertainty abounded. After the Bear buyout, default risk declined significantly (although it remained elevated) through early June, and then began rising again as equity markets fell to their lows in mid-July.
As the market has rallied off of its July lows, default risk is down, but just slightly. The failure for default risk to come in like it did after the March market lows has investors worried that credit markets are still showing negative signs that the market has ignored due to oil's recent declines and the dollar's rally.
click to enlarge