GZ Corporate Credit Spread

## What this measures

The average yield premium that US nonfinancial companies pay on their bonds over a Treasury with the same cash flows, in percentage points. It is computed bond by bond from secondary-market prices across the credit spectrum, then averaged.

## Why it matters

It is the price of corporate borrowing risk. It widens when lenders grow wary and narrows when they compete to lend, and it has widened ahead of or at the start of every US recession since the 1970s. It splits into two parts: expected default, and the Excess Bond Premium (`fed_excess_bond_premium`), which is what investors demand on top of default risk.

## How to read it

Percentage points above Treasuries. Higher means credit is dearer and lenders more cautious. Compare a reading with its own history rather than a fixed threshold.

## What it does not say

It averages across ratings, so it is not a Baa or high-yield spread and will read lower than one. It is monthly and published with a lag of a month or two, so it is not a market-close read.

## Source

Federal Reserve Board staff, updating Gilchrist & Zakrajšek (2012), "Credit Spreads and Business Cycle Fluctuations," *American Economic Review* 102(4). A US government work, public domain. It replaces Moody's Baa–10y spread, whose terms do not allow storage or redistribution.