High-Yield Credit Looks Expensive… Until You Look at Yields
November 12, 2026
From 2011 to 2021, the yield and the option-adjusted spread (OAS) over Treasuries of the Bloomberg U.S. Corporate High Yield Index generally moved together, rising during periods of stress such as 2011 and 2020, and falling as markets recovered. That relationship has broken down over the past few years, and the divergence has become even more pronounced in 2026, with the index experiencing below-average spreads but above-average yields. The current yield to worst (YTW) of the index is 8.3%, 24% above its 6.7% average since 2011, while the OAS of 335 basis points (bps) is approximately 20% below the average OAS over the same period.1
Elevated Treasury yields help explain the divergence. The Federal Reserve raised rates in September for the first time since 2023,2 and the 10-year Treasury yield ended October at 4.93% after reaching 5.29% at the end of September.3 Corporate credit spreads, meanwhile, remain historically tight, suggesting expensive valuations relative to Treasuries. Even so, elevated Treasury yields allow investors to earn attractive all-in yields despite receiving relatively little incremental compensation for assuming the corporate credit risk.
Key Takeaway
Investors are not necessarily being paid much for taking credit risk, but they are being paid well for owning bonds.
Sources:
1,3Bloomberg
2CNBC – Fed approves interest rate hike, signals one more to come this year; 9/16/26
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