Credit markets flash warnings as rates soar
Add Axios as your preferred source to
see more of our stories on Google.


Indicators of bond market stress keep hitting levels not seen since the early days of the COVID market crisis.
Driving the news: BofA's Credit Stress Indicator (CSI) just breached a level — 75, on a scale of 0 to 100 — it hasn't hit since April 2020.
Why it matters: Reaching the 75th percentile on the scale is considered a "critical zone" of credit stress. In the past, it's coincided with significant market dysfunction, says Oleg Melentyev, credit strategist at BofA.
- When markets aren't functioning smoothly, big price swings — and investor losses — are more likely. And companies have a harder time accessing capital.
How it works: The CSI measures stress in U.S. credit markets, focusing mostly on high-yield bonds (the riskiest segment with the lowest credit ratings), and looking at components like distress, volatility and access to funding.
- Meanwhile, an index of Treasury market volatility is just shy of its COVID high; and one index of investment-grade bond market distress is at June 2020 levels.
The bottom line: Rates are rising rapidly — with no end in sight — and recession expectations are mounting. Credit stress is unlikely to recede any time soon.
