Credit Spreads — HYG/LQD Risk On / Risk Off Signal (2026)
SystemTrader's free Credit Spreads tracker. The HYG / LQD ratio with rolling 1-year and 3-year z-scores classifies the credit market as Risk On, Neutral, or Risk Off. When high-yield bonds underperform investment grade, credit is signaling stress before equities — a classic leading indicator. Below: the primary HY/IG ratio, regime classification, per-ETF returns across the credit complex, and four supporting ratios.
Credit is signaling
RISK ON
Spread regime:TIGHT· day 2
HYG / LQD
0.7384
2026-04-30
Z (1Y)
+1.24σ
252d
Z (3Y)
+1.33σ
756d
High yield outperforming investment grade — credit is risk-on. Spreads compressed.
Range:
HYG / LQD Ratio — primary credit-stress signal
HYG/LQD ratioSPY (right axis)WIDE regimeSTRESS regime
Credit Complex — recent returns
| Symbol | Description | Last | 1d | 1w | 1m | 3m | YTD |
|---|---|---|---|---|---|---|---|
| HYG | HY Corp | $80.38 | +0.31% | +0.01% | +1.03% | -0.91% | -0.31% |
| JNK | HY Bond | $96.82 | +0.33% | +0.08% | +1.15% | -0.96% | -0.40% |
| LQD | IG Corp | $108.85 | +0.11% | -0.61% | -0.13% | -1.56% | -1.22% |
| EMB | EM Bond | $95.80 | +0.31% | -0.14% | +1.99% | -0.90% | -0.50% |
| BKLN | Sr Loan | $20.57 | -0.05% | +0.24% | +0.78% | -0.77% | -2.05% |
| AGG | Aggregate | $99.10 | +0.14% | -0.35% | -0.17% | -1.05% | -0.78% |
| TLT | 20Y Treasury | $85.62 | -0.09% | -1.07% | -1.23% | -1.73% | -1.77% |
| IEF | 7-10Y Treasury | $95.03 | +0.24% | -0.36% | -0.43% | -1.01% | -1.18% |
| SHY | 1-3Y Treasury | $82.47 | +0.10% | -0.01% | -0.12% | -0.54% | -0.42% |
Supporting Ratios
HYG / LQD
0.7384HY corp vs IG corp — primary credit-stress signal
+1.64% over period
JNK / AGG
0.9770Junk vs aggregate bond — alternative HY/IG view
-0.42% over period
EMB / LQD
0.8801EM bonds vs US IG — emerging-market credit appetite
+6.05% over period
TLT / HYG
1.0652Long Treasuries vs HY — rates duration vs credit risk
-8.24% over period
How Credit Spreads Tracker Works
- 1Pull daily prices for nine credit and Treasury ETFsEach trading day after the close, we fetch closing prices for HYG, JNK, LQD, EMB, BKLN, AGG, TLT, IEF, and SHY directly from the TradeStation market-data API.
- 2Compute the HYG/LQD ratio plus three supporting ratios with rolling z-scoresThe primary signal is HYG (high-yield corporates) divided by LQD (investment-grade corporates). We z-score it against rolling 252-day (1-year) and 756-day (3-year) windows. Three supporting ratios — JNK/AGG, EMB/LQD, and TLT/HYG — give cross-confirmation.
- 3Classify the current regime and surface as Risk On or Risk OffZ-scores ≥ +1σ are TIGHT (Risk On). Between -1σ and +1σ is NORMAL (Neutral). -1σ to -2σ is WIDE (Risk Off). Below -2σ is STRESS (severe Risk Off). The big label at the top of the page tells you which regime credit is currently in.
Who Uses Credit Spreads Tracker
Day Traders
Use credit spreads as a same-session confirmation or contradiction of equity moves. When SPY breaks higher but HYG/LQD diverges lower, the rally is suspect.
Swing Traders
Identify regime shifts before they show up in equities. Credit historically widens 2–6 weeks before major equity peaks, giving swing positions time to adjust.
Long-Term Investors
Monitor systemic credit health as a recession early-warning. Sustained STRESS regimes have preceded every major bear market since 1998.
Risk Managers
Cross-asset risk dashboard input. Combine the HYG/LQD z-score with VIX, breadth, and yield-curve signals to build a multi-factor risk model.
Pro Tips
01
Watch for credit widening BEFORE equity selling
High-yield investors price default risk continuously and react to early signs of stress. If HYG/LQD is falling while SPY is making new highs, that divergence is the signal.
02
Use the 3-year z-score for regime context, the 1-year for tactical timing
A +2σ on the 1-year z-score may just be a normal cyclical tightening. The 3-year z-score tells you whether spreads are extreme by multi-year standards.
03
Don't trade off credit alone — pair with VIX and breadth
Credit is one of three major leading indicators. Confirming signals across all three (credit widening + VIX rising + breadth deteriorating) is far more reliable than any single read.
04
Sticky regimes carry more weight than fast flips
A WIDE regime that's been in place for 30+ days is a stronger signal than one that just flipped today. Watch the "day in regime" counter.
05
When TLT and HYG fall together, it's rates not credit
Credit-driven selloffs show LQD outperforming HYG. Rates-driven selloffs show both LQD and HYG falling together. The TLT/HYG ratio helps distinguish.
06
EM credit (EMB) often cracks first
Emerging-market credit spreads typically widen before US high-yield in global risk-off events. Watch EMB/LQD as an early warning ahead of HYG/LQD.
07
Extreme TIGHT can signal complacency
A +2σ HYG/LQD reading means HY is priced for perfection. Historically, sustained extreme-tight regimes have been followed by sharp reversals.
08
Senior loans (BKLN) are the floating-rate cousin
BKLN tracks senior-secured floating-rate bank loans. Watch its trend independently — when it diverges from HYG, it can signal credit-quality stratification within the HY market.
Common Issues & Solutions
Why does my chart show no recent stress periods?▾
Credit stress is rare. Since 2021 — the start of the aligned data window — there have been only a handful of brief WIDE episodes. Most of the time markets are in NORMAL or TIGHT. The page is doing its job by showing you that today is not a stress day.
The data shows yesterday's close, not today's▾
Daily bars are appended after market close (4 PM ET). Our pipeline runs at 1 PM PT (4 PM ET) and the recompute completes shortly after. Today's bar should be visible by ~5 PM ET on regular trading days.
YTD return looks different from cumulative period return▾
YTD resets at January 1 each year. The other return columns (1d/1w/1m/3m) are pure rolling lookbacks. Both are correct — they're just measuring different windows.
I clicked a regime label and nothing happened▾
The regime label is a status indicator, not a link. Click on the time-range selector below it (6M / 1Y / 2Y / 5Y / ALL) to change the chart window.
SystemTrader vs Bloomberg Terminal
| Feature | SystemTrader | Bloomberg Terminal |
|---|---|---|
| Cost | Free | $24,000+/year |
| HYG/LQD ratio with rolling z-scores | Built-in regime classification | Manual computation in formula bar |
| Credit-stress regime labeling | TIGHT/NORMAL/WIDE/STRESS auto-classified | No equivalent |
| Risk On / Risk Off framing | Front and center | Not provided |
| Update cadence | Daily after close | Real-time intraday |
| Mobile access | Responsive web | Bloomberg Anywhere ($) |
Frequently Asked Questions
What is a credit spread?▾
A credit spread is the yield difference between a corporate bond and a comparable-maturity Treasury bond. It compensates investors for taking on default risk. When credit spreads widen, investors are demanding more compensation for risk — which usually signals stress. When spreads tighten, the credit market is healthy.
What is the HYG/LQD ratio and why does it matter?▾
HYG holds high-yield (junk-rated) corporate bonds; LQD holds investment-grade corporate bonds. The HYG/LQD ratio measures how high-yield is performing relative to investment grade. Rising ratio = HY outperforming = credit conditions tightening = risk-on. Falling ratio = HY underperforming = spreads widening = risk-off.
Why do credit spreads matter to stock traders?▾
Credit investors price default risk in real time and react to early signs of stress before equity investors do. Historically, credit spreads have widened 2–6 weeks before major equity peaks. This makes the HYG/LQD ratio a leading indicator for the broader stock market.
What does "TIGHT" credit mean?▾
TIGHT means the HYG/LQD ratio is more than +1 standard deviation above its 1-year average. Spreads are compressed, high-yield is outperforming investment grade, and the credit market is in risk-on mode. This is generally bullish for stocks.
What does "WIDE" or "STRESS" credit mean?▾
WIDE (-1σ to -2σ z-score) means spreads are widening — high-yield is underperforming investment grade. STRESS (z ≤ -2σ) means severe credit stress. Both regimes typically precede or accompany equity-market drawdowns.
How is the z-score calculated?▾
The z-score is the current HYG/LQD ratio minus its rolling mean, divided by its rolling standard deviation. We compute two z-scores: a 252-day (1-year) for tactical context, and a 756-day (3-year) for regime context. A z-score of +1 means the ratio is one standard deviation above its recent average.
Is credit a leading indicator for equities?▾
Yes — credit has historically led equities in major risk events. The 2007 credit crack started in early 2007, six months before the equity peak. The 2018 Q4 selloff was preceded by credit widening. The 2020 COVID crash was preceded by HY spread widening in February. This pattern is consistent enough to be a watchable signal.
What is the difference between HYG and LQD?▾
HYG (iShares iBoxx $ High Yield Corporate Bond ETF) holds bonds rated below investment grade — BB, B, CCC. Higher yields, higher default risk. LQD (iShares iBoxx $ Investment Grade Corporate Bond ETF) holds bonds rated BBB and above. Lower yields, much lower default risk. The ratio between them measures market risk appetite.
What ETFs are tracked on this page?▾
Nine credit and Treasury ETFs: HYG (HY corp), JNK (HY bond, alternative), LQD (IG corp), EMB (EM bond), BKLN (senior loans), AGG (aggregate bond), TLT (20+ year Treasury), IEF (7-10 year Treasury), and SHY (1-3 year Treasury). Together they cover the full credit-quality spectrum from cash-equivalent to junk.
How often is the data updated?▾
The underlying CSVs are refreshed daily after market close (around 1 PM PT / 4 PM ET) directly from the TradeStation market-data API. The recompute and JSON output regenerate within a few minutes after the fetch completes. All ratios and z-scores reflect the most recent close.
Why use ETF proxies instead of OAS spread data?▾
ICE BofA OAS spread data (the academic standard) is published by FRED with a 1-day lag and is only end-of-day. ETF prices update intraday and reflect real-time market sentiment. The HYG/LQD ratio is a cleaner, more timely proxy for the same underlying signal — and it's tradeable, which OAS data is not.
What is the difference between investment grade and high yield?▾
Investment grade (IG) = bonds rated BBB- or higher by S&P/Fitch (Baa3+ by Moody's). Lower default risk, lower yields. High yield (HY) = bonds rated below investment grade. Higher default risk, higher yields. The split exists because many institutional investors are mandated to hold only investment-grade debt.
How do I interpret a z-score of +1 or +2?▾
A z-score of +1 means the current HYG/LQD ratio is one standard deviation above its rolling average — moderately tight. +2 means two standard deviations above — extreme tight, historically associated with peak risk-on conditions and complacency. Negative z-scores are the inverse: -1 means moderately wide, -2 means severe stress.
What does "Risk On" mean in the credit context?▾
In credit markets, Risk On means investors are willing to lend to lower-quality borrowers at narrower spreads. This shows up as HYG outperforming LQD and the HYG/LQD ratio rising. Risk On in credit is generally consistent with risk-on in equities, FX, and commodities — but credit often gets there first.
Can credit spreads predict recessions?▾
Credit spreads are one of the most reliable recession-leading indicators. Every US recession since 1980 has been preceded by significant credit-spread widening. The signal is not infallible — there have been false positives (e.g., 1998, 2011, 2015) — but a sustained STRESS regime warrants serious attention.
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Last updated: 2026-04-30