Spreads explained

chart of the month


Merrill Lynch has designed an econometric model that helps explain over 90% of the movements in credit spreads since the beginning of 2000. The chart represents the five factors that help explain the movements in spreads. These are Moody’s speculative-grade default rates, the VDAX index of implied volatility, the slope of the swap curve, three-month equity returns and the proportion of triple-Bs within Merrill Lynch’s ERD0 index, that represents the AA-BBB segment of the high-grade sector.


To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: