Global anchor · Amplifiers · Credit and Financial Stress
9coldat an extreme
Now 0.93 percentage points | Data for Sep 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
Yields on US corporate bonds minus Treasury yields of the same maturity. Compiled by Gilchrist and Zakrajšek from individual corporate bonds and published by the Federal Reserve.
The narrower the spread, the less markets worry about companies defaulting. When it widens, stocks often fall and the economy weakens.
Public substituteWe use this in place of “Corporate bond spreads (ICE BofA, Moody’s)”. The ICE BofA and Moody’s spreads are compiled by index providers from their constituent bonds; the Fed’s GZ spread is calculated by researchers from the prices of individual corporate bonds. Both measure how much more companies pay to borrow than the government, but they cover different bonds and give different numbers. They measure similar things, but they are not the same number.
Lower = markets less worried about credit risk.
Where it stands now
coldcoolneutralwarmhotHatched = earlier periods that were also cold
When it was here before
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every cold month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened nextSample too small to draw conclusions (past cold months: 2; market episodes: 1).
Has hot or cold lined up with later returns?
1982–2021: average yearly change in US stocks over the next 5 years
In this period, the hotter the month, the lower the average over the next 5 years. The months overlap, so there are really only a few market episodes. This is a tendency, not a rule, and not a forecast.
What it is linked to
Credit spreadtoUS stocksCommon explanation: Cause · opposite direction
A wider credit spread means costlier funding and higher default risk for companies, weighing on share prices
This issue: Credit spread at 9 (cold), US stocks at 94 (hot) — Credit spread below normal, US stocks above normal, in line with the common explanation (this is an inverse link).
Weak or inconsistentAgreement +0.47 · in step in 24 of 39 5-year periods
Lending standardstoCredit spreadCommon explanation: Cause · same direction
When banks tighten lending, borrowing becomes harder and costlier for companies
This issue: Lending standards at 49 (neutral), Credit spread at 9 (cold) — at least one is in the neutral range (40–60), so we make no call this issue.
Not visible in our dataAgreement +0.09 · in step in 3 of 4 5-year periods
In most periods the two moved the way the common explanation says, but their highs and lows do not line up over the whole history, so overall no relationship is visible.
Credit spreadtoLeading indexCommon explanation: Cause · opposite direction
Tighter credit holds back investment and hiring
This issue: Credit spread at 9 (cold), Leading index at 42 (neutral) — at least one is in the neutral range (40–60), so we make no call this issue.
Not visible in our dataAgreement −0.02 · in step in 20 of 39 5-year periods
In most periods the two moved the way the common explanation says, but their highs and lows do not line up over the whole history, so overall no relationship is visible.
Credit spread and Financial stress are often linked: both measure how fearful markets are, so the same shock makes both jump. They share a common source, so we do not draw a link between them.
Values
Data and sources