Figure on spreads of corporate bond yields over comparable off-the-run Treasury yields, 1998-2007. Data are plotted as three curves. The high-yield bond spread fluctuates between 3 percent and 8 percent. It begins around 3 percent in 1998, rises to about 6 percent in late 1998, and then generally rises to peak near 8 percent several times: in 2000, 2001, and 2002. It then generally falls to just under 4 percent by 2004, where it fluctuates within a relatively narrow range through early 2007. The BBB and AA spreads exhibit similar patterns but fluctuate within narrower and lower ranges: the BBB between 1.5 and 3.5 percent and the AA between 1.25 percent and 1.75 percent.

Note: The data are daily and extend through February 7, 2007. The ten-year high-yield, ten-year BBB, and ten-year AA indexes are compared with the ten-year Treasury yield. Source: Derived from smoothed corporate yield curves using Merrill Lynch bond data.