GZ Credit Spread

The extra yield that corporate borrowers pay above Treasuries reveals how nervous credit investors are about defaults. When spreads widen, lenders are pricing in rising default risk — often 6 to 12 months before that stress shows up in hard economic data. That widening mixes two things: a genuine deterioration in borrower fundamentals and a shift in how much compensation investors demand for bearing the risk. The Excess Bond Premium card separates the second from the first, and it's the pair read together that has been one of the most reliable recession warnings on record. If the yield curve tells you whether a recession is coming, this tells you whether credit markets are already feeling it.