High Yield Spreads Near Record Lows: What the Average Hides

Institutional investors have long treated the High Yield bond market as an early warning system.

Corporate stress often appears in credit spreads before it registers in stock prices. When spreads widen, equity investors take notice.

By that measure, today looks remarkably calm. The headline ICE BofA US High Yield Index OAS sits at 2.66% as of mid-July 2026. That is well below the 30-year average of 5.35%, and near the all-time low of 2.41% set in June 2007.

A spread this tight implies confidence in a clear economic runway for corporate borrowers. However, today's macro variables invite a closer look:

• S&P Global projects U.S. BB borrowers refinancing in 2026 will face a roughly 206 basis point increase in funding costs.

• U.S. speculative grade corporate debt maturities are set to nearly quadruple from $185 billion in 2025 to $730 billion in 2028.

• Goldman Sachs, Bank of America, and Morgan Stanley have all pushed their first rate cut forecasts into mid-to-late 2027.

Yet the headline spreads remain near all-time low. The index average tells one story. The composition tells another.

Source: Bloomberg

BB rated companies represent roughly 55% of the index. These businesses locked in fixed-rate financing during the pandemic-era. Their OAS reflects a market that is comfortable with their ability to service and refinance debt. CCC rated companies represent roughly 15% of the index. Their OAS has widened by more than 260 basis points since January 2025.

55% of the index reflects confidence. 15% reflects growing concern. For the equity investor, that dispersion raises a question.

Which group better represents what your equity portfolio is exposed to?