CCC credit spreads are soaring at an alarming rate.

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CCC credit spreads have been on the rise. As of June 27, 2024, the ICE BofA CCC & Lower US High Yield Index Option-Adjusted Spread (OAS) stands at 9.44%. This spread represents the difference in yield between US dollar-denominated corporate debt rated CCC or below and the corresponding spot Treasury curve. The widening spread suggests increased risk perception for lower-rated corporate bonds.

Additionally, the spread is now significantly higher than the pre-COVID level as of December 31, 2019. This trend indicates that financial conditions may be tightening due to the Federal Reserve’s policy actions, including rate hikes and balance sheet reduction.