CCC Junk Bond Spread Widens to 12.29 Points as Broader Credit Steadies

The extra yield investors demand to hold the riskiest U.S. junk bonds kept rising this week even as the rest of the corporate bond market calmed. The option-adjusted spread on the ICE BofA CCC & Lower U.S. High Yield Index reached 12.29 percentage points on Wednesday, Oct. 7, up from 12.02 on Friday, Oct. 2, according to ICE BofA index data published by the Federal Reserve Bank of St. Louis on FRED.

That is the highest reading in the three years of daily data FRED makes available, which begin Oct. 9, 2023. Over the same days, the broad high-yield spread and the investment-grade spread both edged lower. Oct. 7 is the latest date in the FRED series as of Friday morning.

Credit spreads this week by rating

Option-adjusted spread, percentage points	Sept. 1	Oct. 2	Oct. 7	Change since Oct. 2
High yield, all	2.65	3.10	3.09	-0.01
BB	1.52	1.91	1.89	-0.02
B	2.75	3.12	3.08	-0.04
CCC and lower	10.49	12.02	12.29	+0.27
Investment grade, all	0.81	0.85	0.82	-0.03
BBB	0.99	1.04	1.02	-0.02
AAA	0.42	0.41	0.38	-0.03

Source: ICE BofA indexes via FRED, Federal Reserve Bank of St. Louis.

The broad high-yield spread peaked at 3.24 on Oct. 1, as covered in our report on the 10-year yield's climb to 5.31%. It has since held between 3.03 and 3.12. The CCC spread did not follow it down. It rose on each of the last three days in the data, from 12.02 on Oct. 2 to 12.11, 12.14 and 12.29.

Why are CCC bond spreads widening?

The FRED data show where spreads moved, not why. What they do show is that the pressure is concentrated at the bottom of the rating scale. Since Sept. 1, the CCC spread has widened 1.80 points, compared with 0.37 point for BB bonds and 0.33 point for single-B bonds. The investment-grade spread is up only 0.01 point over that period.

How Treasury yields moved alongside spreads

Corporate bond yields are the Treasury yield plus the spread. The 10-year Treasury yield closed at 5.28% on both Oct. 2 and Oct. 7, then fell to 5.22% on Oct. 8, according to Treasury Department data. The 2-year yield eased from 4.83% on Oct. 2 to 4.77% on Oct. 7 and 4.75% on Oct. 8.

Yield, percent	Sept. 1	Oct. 2	Oct. 7	Oct. 8
2-year Treasury	4.39	4.83	4.77	4.75
10-year Treasury	4.79	5.28	5.28	5.22
High-yield index, effective yield	7.18	8.13	8.08	n/a
Investment-grade index, effective yield	5.53	6.03	5.98	n/a

Sources: U.S. Department of the Treasury par yield curve; ICE BofA effective yields via FRED. FRED had not posted Oct. 8 index data as of Friday morning.

The high-yield index's effective yield hit 8.22% on Oct. 1, its highest level of 2026 in the FRED data. Investment-grade yields are up about 0.45 point since Sept. 1, nearly all of it from higher Treasury yields rather than wider spreads.

What does this mean for corporate borrowers?

For investment-grade companies, the cost of borrowing is being set mainly by the Treasury market. For the lowest-rated borrowers, it is rising on both fronts. The Treasury sold 30-year bonds at a 5.618% yield on Oct. 8, and Fed Governor Christopher Waller said the same day he expects more rate hikes. More data briefs are in the Capital Markets section.