High-Yield Bond Index Shows 230-Basis-Point Yield Premium

The ICE BofA U.S. High Yield Index closed Tuesday with an effective yield of 8.21%, while the ICE BofA U.S. Corporate Index stood at 5.91%. The 2.30-percentage-point difference equals 230 basis points, showing the distance between the two benchmark readings. These figures apply to the named indexes, rather than every U.S. bond in either rating category.

On May 14, 2025, the high-yield index’s effective yield was 7.28%, compared with 5.37% for the corporate index. Their difference was 1.91 percentage points, making the Oct. 20 gap 39 basis points wider than that earlier reading. A basis point is one-hundredth of a percentage point, so 39 basis points represents a 0.39-percentage-point widening between the two observations.

Option-adjusted spreads showed a different comparison on Oct. 20. The high-yield index’s spread was 3.33%, while the investment-grade corporate OAS series measured 0.87%, a 2.46-percentage-point difference, or 246 basis points. OAS compares an index’s spread over a Treasury curve after adjusting for embedded options. It is distinct from effective yield, so the 246-basis-point OAS difference is not another calculation of the 230-basis-point yield gap.

High-yield bonds are below investment grade and carry greater default risk than investment-grade bonds. The yield gap measures the difference between these two indexes; by itself, it does not show whether investors bought or sold high-yield funds. The two figures also do not represent the yield on every bond within either rating category.

The high-yield index’s effective yield was 8.11% at the Oct. 8 close, 10 basis points below its Oct. 20 reading. Earlier coverage of high-yield yields examined that October reading alongside credit-spread movements.