VIX vs HY Credit Spreads
The VIX and HY credit spreads are the two most important cross-asset stress gauges in US markets. VIX measures 30-day equity volatility expectations; HY OAS measures the premium lenders demand to hold junk-rated corporate bonds over Treasuries.
Also known as: VIX (fear index, volatility index, CBOE VIX) · HY Credit Spread (OAS) (HY spread, high yield spread, junk bond spread, HY OAS)
Why This Comparison Matters
The VIX and HY credit spreads are the two most important cross-asset stress gauges in US markets. VIX measures 30-day equity volatility expectations; HY OAS measures the premium lenders demand to hold junk-rated corporate bonds over Treasuries. As of April 2026, VIX trades at 18.84 and HY OAS sits near 262 basis points, both below long-run averages and consistent with a complacent-market regime. The 2008 crisis saw VIX close at 82.69 and HY OAS hit 2,182 basis points. The 2020 COVID shock saw similar extremes: VIX 82.69 (March 16) and HY OAS 1,087 (March 23). When both gauge extremes together, systemic stress is present; divergence reveals whether stress is equity-specific or credit-specific.
What Each Gauge Measures
The CBOE Volatility Index (VIX) measures 30-day forward-looking implied volatility of S&P 500 index options, annualized. It is calculated from option prices using a variance-swap methodology. A VIX of 18 implies the market expects SPX to move approximately plus or minus 5.2 percent over the next month.
The ICE BofA US High Yield Index Option-Adjusted Spread (OAS) measures the yield premium that US high-yield corporate bonds trade at versus Treasuries of matching duration, after adjusting for embedded options like call features. It reflects default risk compensation plus liquidity premium plus risk-aversion premium. The series (FRED ticker BAMLH0A0HYM2) has daily history since 1996 and averages near 450 basis points historically.
The Tight Historical Correlation
VIX and HY spreads have a strong positive correlation, typically 0.7 to 0.85 on weekly and monthly horizons. Both respond to the same underlying macro risks: growth fears, credit deterioration, policy uncertainty, geopolitical shocks. When risk appetite broadly declines, both gauges rise together; when risk appetite recovers, both compress.
The daily correlation is tighter than most single-factor relationships in finance because the two gauges effectively price the same systemic risk from different angles. Equity implied vol and credit-default-risk premium are mathematically related through the Merton structural credit model, where a firm's equity is a call option on its assets and bondholders are short a put option on the same assets. Rising equity volatility mechanically implies higher default risk and higher credit spreads, which is the theoretical reason for their co-movement.
The 2008 Financial Crisis Benchmark
The 2008 financial crisis produced the highest readings for both gauges in modern data. VIX closed at 80.86 on November 20, 2008 and 89.5 intraday on October 24, 2008. HY OAS peaked at 2,182 basis points in December 2008. For roughly 6 months (September 2008 through March 2009), both gauges stayed at elevated levels that would have been characteristic of tail-risk events in any prior period.
Conditional Forward Response (Tail Events)
How HY Credit Spread (OAS) has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in VIX. Computed from 1,283 aligned daily observations ending .
Following these triggers, HY Credit Spread (OAS) rises 1.23% on average over the next 5 sessions, versus an unconditional baseline of +0.06%. 129 qualifying events; HY Credit Spread (OAS) closed positive in 57% of them.
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Frequently Asked Questions
What is the normal correlation between VIX and HY credit spreads?+
VIX and HY OAS have a positive correlation of approximately 0.7 to 0.85 on weekly and monthly timescales, among the tightest cross-asset relationships in finance. Both gauges respond to the same underlying macro risks (growth fears, credit deterioration, policy uncertainty, geopolitical shocks). The theoretical basis is the Merton structural model, where equity is a call option on firm assets and bondholders are short a put option on the same assets, mathematically linking equity volatility to credit default risk.
What was the highest reading for VIX and HY spreads simultaneously?+
The 2008 financial crisis produced the all-time simultaneous peak: VIX closed at 80.86 on November 20, 2008 and 89.5 intraday on October 24, while HY OAS reached 2,182 basis points in December 2008. The 2020 COVID crash produced similar extremes: VIX closed at 82.69 on March 16, 2020 (all-time closing high) while HY OAS reached 1,087 basis points on March 23, 2020. These two episodes represent the upper bound of modern cross-asset stress, and both resolved within months thanks to aggressive central bank intervention.
What does it mean when VIX spikes but HY spreads stay calm?+
This divergence typically indicates equity-specific stress rather than systemic credit concern. The August 2024 yen carry unwind is a textbook example: VIX intraday reached 66 but HY OAS only widened from approximately 320 to 390 basis points. The driver was leveraged position unwinding in FX-funded equity positions, which produced rapid equity volatility without affecting the fundamental credit quality of US corporate borrowers. Such episodes tend to resolve within days to weeks, with VIX falling back rather than HY catching up.
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Data sourced from FRED, CoinGecko, CBOE, and other providers. This page is for informational purposes only and does not constitute financial advice. Past performance does not guarantee future results.