WThe three bars show the last 3 weeks for this indicator, oldest left to newest right. Bar height reflects each reading relative to the other two — the tallest is the highest of the three, the shortest the lowest.
Historical context: Currently in the 5th percentile — near historically low/favorable levels.
What this means right now: Baa spread is historically tight — credit markets are in a strong risk-on regime. Corporate borrowing costs are low relative to history; no credit stress visible. Can signal complacency if equity valuations are also stretched.
Baa–10yr Treasury Spread · Daily · 1986–2026
Grey areas = NBER recessions · Scroll to read · zoom and pan in Expand
Monthly values
Baa–10yr Treasury Spread — the last 12 months
Every month's reading, with the band the heatmap gives it. The chart above shows the same series in full.
Month
Value
Band
Sep 2026
1.50%
Very strong reading
Aug 2026
1.59%
Very strong reading
Jul 2026
1.63%
Very strong reading
Jun 2026
1.53%
Very strong reading
May 2026
1.57%
Very strong reading
Apr 2026
1.70%
Very strong reading
Month-end readings of the same series the chart shows, from baa10y. Values are the current record, not point-in-time: a month that has since been revised shows its revised value.
What is the Baa–10yr Spread?
The Baa–10yr spread (FRED: BAA10Y) is the difference between Moody's Seasoned Baa Corporate Bond Yield and the 10-Year Treasury Constant Maturity yield. Baa is the lowest investment-grade rating; these bonds represent the credit of typical large US corporations. The spread measures the extra yield investors demand as compensation for corporate default risk and credit uncertainty above the risk-free Treasury rate.
When the economy is calm and corporate balance sheets are healthy, investors accept narrow spreads — the Baa premium above Treasuries compresses toward its historical floor. When recession risk rises, defaults increase, or credit markets seize up, the spread widens dramatically as investors demand more compensation for holding corporate credit. The BAA10Y spread has a history back to 1986, capturing multiple full credit cycles.
This spread is one of the most widely cited measures of overall credit health. Unlike HY and IG spreads, which track liquid bond indices, the Baa–10yr is based on the Moody's yield series — a long-running benchmark giving the deepest historical context of any credit spread series.
How We Color-Code the Baa–10yr Spread
Our heatmap colors each indicator based on historically significant thresholds:
< 1.75%
Unusually tight — credit markets in a calm, risk-on regime; below historical p25
1.75% – 2.25%
Healthy — normal post-crisis compression; investment-grade credit broadly available
2.25% – 3.0%
Moderate — some credit caution but no widespread stress; typical mid-cycle level
Severe stress — GFC/COVID-level spread widening; credit markets impaired
Historical Extremes — What Happened Next?
When this indicator reaches extreme levels, history shows consistent patterns:
2008-12-05GFC Peak Spread
6.07%
The widest Baa–10yr spread in modern history — credit markets froze as Lehman's collapse triggered mass deleveraging. Corporate bond issuance halted; investment-grade companies faced double-digit borrowing costs above Treasuries.
2020-03-20COVID Shock Spike
4.23%
Spreads spiked sharply as markets feared a deep recession and corporate cash flow collapse. The Fed's emergency March 2020 announcement of the Corporate Credit Facility (CCF) directly addressed this market; spreads retraced almost entirely by June 2020.
2021-07-06Post-COVID Trough
1.90%
The tightest Baa–10yr spread in the series' history — a combination of massive fiscal stimulus, Fed QE, and surging corporate earnings compressed credit risk premia to historically low levels.
Investor Checklist — Current Reading
Based on the current Baa–10yr Spread reading of 1.50% (Very Positive):
ℹTight spreads support risk assets; complacency risk if broad market overextended
✓Review corporate bond duration — tight spreads offer less cushion if rates move
Frequently Asked Questions
What is Moody's Baa rating and why is it used for this spread?
Baa is the lowest investment-grade rating tier in Moody's scale (equivalent to BBB in S&P/Fitch). Investment-grade bonds are held by pension funds, insurance companies, and most institutional investors. The Baa tier is particularly important because it sits at the boundary between investment-grade and high-yield — a company downgraded below Baa becomes a "fallen angel" and is forced-sold by investment-grade mandates, creating a credit cliff. This makes Baa spreads a sensitive leading indicator of broader credit stress.
How does the Baa–10yr spread differ from HY and IG spreads?
The Baa–10yr spread (FRED BAA10Y) measures the absolute yield of Moody's Baa corporate bonds minus the 10-year Treasury. The IG spread (BAMLC0A0CM) and HY spread (BAMLH0A0HYM2) are option-adjusted spreads from the ICE BofA index series. The Moody's series has a much longer history (1986 vs. ~1997 for BofA), making it better for long-run comparisons, but the BofA spreads are more granular and standardized. All three typically move together during credit stress events.
Why did the Fed create emergency corporate credit facilities in March 2020?
When the Baa spread spiked above 4% in March 2020, it threatened a self-reinforcing credit crisis — companies unable to roll over maturing debt at reasonable rates, leading to defaults, then more spread widening. The Fed's Primary Market Corporate Credit Facility (PMCCF) and Secondary Market Corporate Credit Facility (SMCCF) explicitly targeted investment-grade corporate bonds, including Baa-rated credits. The announcement alone was enough to reverse the spread widening; the facilities barely needed to be used.
What is the relationship between this spread and economic recessions?
The Baa–10yr spread typically begins widening 3–12 months before a recession is officially declared, and peaks somewhere near the trough of the downturn. During the 2001 recession it peaked around 3.5%. During the GFC it peaked near 6.2%. The spread is a forward-looking indicator because bond markets price in default expectations before the defaults actually materialize in economic data.