Glossary
High Yield Spread
The high yield spread is the extra interest rate that lower-rated corporate bonds pay over safer government bonds of the same maturity.
Why it matters
This spread tends to widen, meaning junk-rated borrowers suddenly look relatively more expensive to lend to, when investors expect more corporate defaults or a slowing economy, which makes it a widely watched early-warning signal.
How CORVIX uses it
High yield spread widening is one of the inputs behind CORVIX's correction risk estimate, alongside other measures of market stress.