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Credit spread

The extra yield companies pay over government bonds. Widening spreads mean lenders are more worried about defaults.

A company bond yields more than a government bond of the same maturity because the company might default. The difference is the credit spread.

High-yield ("junk") spreads react most, because those companies are most exposed to a downturn.

Why it matters

Spreads are a real-time gauge of stress. They widen sharply before and during recessions, as lenders demand more compensation and some borrowers lose access to credit altogether, which itself slows the economy.

See the data: US high-yield credit spread.

General information, not advice.