# Credit spread: Baa corporate bonds over Treasuries

> How the gap between Baa corporate yields and 10-year Treasuries measures stress in the economy, and the thresholds Anacleto uses.

Updated 2026-10-17 · https://anacleto-zb7h.onrender.com/guides/credit-spread

The **credit spread** is the extra yield that companies rated **Baa** by Moody's (the lowest investment-grade rating)
pay over **10-year US Treasuries**, in percentage points. When lenders worry about defaults they ask for more, and the
spread widens.

## How Anacleto reads it

- above **2.8 points**: red, stress;
- below **1.8 points**: green, calm credit markets;
- in between: neutral.

## Why it matters for equities

The spread measures the health of the economy rather than the price of shares, and it has tended to widen *before*
equity crashes, as in 2007–2008. It is one of the stress thermometers, together with the
[yield curve](https://anacleto-zb7h.onrender.com/guides/yield-curve). Data: Moody's Baa yield from FRED, available monthly since 1919.

## Limits

Spreads can also widen for technical reasons (liquidity, supply of new bonds), and in fast crises they move together
with equities rather than ahead of them.