What Changed?
Over the past two years the U.S. corporate credit market has undergone a structural adjustment. Yields on corporate bonds, both investment-grade and high-yield, have risen meaningfully as the Federal Reserve maintained higher rates and liquidity conditions tightened. At the same time, credit spreads — the extra yield investors demand over Treasuries — have shifted, reflecting an evolving risk landscape rather than just a cyclical uptick.
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The Numbers
The option-adjusted spread for the BBB-rated U.S. corporate index stands near ~1.06% (106 bps).
For speculative-grade (high yield) corporates, the ICE BofA High Yield Index OAS is about 3.09% (309 bps) as of mid-November 2025.
Outstanding U.S. corporate bond market size: roughly $11.4 trillion as of Q2 2025, up ~3.9% Y/Y.
Why It Matters
This repricing matters because it signals a shift from ultra-easy credit conditions to an environment where issuance, refinancing and risk premia are materially higher. For issuers, elevated yields mean higher cost of capital and tighter margins for new growth projects or debt refinancing. For investors, even if spreads look benign, the absolute level of yields and the structural backdrop (slower growth, higher rates, more credit heterogeneity) make credit risk a more pronounced factor. For investors, today’s credit environment rewards selectivity — higher-quality issuers may offer better risk-adjusted returns than simply reaching for yield.
Takeaway
Credit markets aren’t just ticking up temporarily — they’re recalibrating. The higher yield base and changed rate context mean that both borrowers and lenders must navigate a fundamentally different regime. The risk cushion that existed in the prior low-rate era is thinner, and the next few quarters will test how durable corporate credit fundamentals are under these higher cost conditions.