Interpreting movements in high-yield corporate bond market spreads

Quarterly Bulletin 2001 Q1
Published on 01 March 2001

By Neil Cooper, Robert Hillman and Damien Lynch of the Bank’s Monetary Instruments and Markets Division.

Spreads of corporate bond yields over risk-free rates are often used as a leading indicator of macroeconomic conditions. The large widening of spreads within the US high-yield bond market during the second half of 2000 might be a precursor of a downturn in the US economy. This article describes work done at the Bank during the last two months of last year that attempted to interpret these movements and assess their implications for the US economy.

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