An important meter for financial atmosphere and corporate credit is withdrawn from its recent high months of heights in a positive development for risk taking on stocks and crypto markets. However, the relief could be short -lived in pr. Some observers.
The indicator considered is ICE/BOFA US HIGH YIELD Index Option-Asjusted Spreads (OAS), measuring the average dividend difference (spread) between US dollar-denominated high-interest corporate bonds and US Treasury’s securities, adjusted for embedded options in the bonds.
It is widely traced as a credit risk of risk, where the expanded spread represents growing investors’ concerns about corporate standard or financial weakness, which often causes investors to lean their exposure to more risky assets, such as technology stores and cryptocurrencies.
OAS, which represents the premium investor’s demand to have high-term bonds over the relatively safer Treasury, has dropped to 3.2% from the six-month height of 3.4% early this month.
The fall in the spread supports a renewed recovery in Bitcoin (BTC) and Nasdaq.
The spread increased by 100 basic points in four weeks to mid-March, when President Donald Trump’s tariffs raised the recession ghost. During this time, both BTC and Nasdaq took a Christmas in which cryptocurrency fell to low under $ 80K.
Temporary relief?
Analysts expect OAS to spread further in the coming weeks as the negative impact of Trump’s tariffs will be clear, according to Mint and Reuters.
“We think this is just getting started and will get worse before it gets better,” said Hans Mikkelsen, CEO of credit strategy at TD Securities, in a recent client note.
Use of technical analysis principles on the OAS diagram suggests the same.
The spread has moved past the three-year-old falling trendline, which justifies high alarm from risk production investors.
