What Happens to HY Credit Spread (OAS) When the Savings Rate Hits Zero?
What happens when Americans stop saving? The consumer spending cliff, credit card debt explosion, and what it means when the savings buffer is gone.
How HY Credit Spread (OAS) Responds
Scenario Background
The personal savings rate measures the percentage of disposable income that households save rather than spend. When it falls toward zero, it means consumers are spending everything they earn, and often more, by drawing down savings or taking on debt. This is the final stage of a consumer-led expansion and a warning that the spending engine is running on fumes.
Read full scenario analysis →Historical Context
The savings rate hit 1.4% in July 2005,just before the housing bust and financial crisis revealed that consumers had been borrowing against home equity to fund spending. It fell to 2.1% in late 2007, the eve of the Great Recession. After COVID stimulus pushed the rate to 34% in April 2020, it has been declining steadily as consumers spent down excess savings. The savings rate reached 3.2% by late 2024, with excess savings estimated to be fully depleted. In the 1990s and 2000s, savings rates belo...
What to Watch For
- •Savings rate falling below 2%,the buffer is essentially gone
- •Credit card balances and delinquencies rising simultaneously, consumers stretching
- •Excess COVID savings fully depleted according to Fed estimates
- •Wage growth decelerating while spending holds, financed by debt, not income
- •Retail sales showing negative month-over-month prints, the spending cliff arrives
Other Assets When the Savings Rate Hits Zero
Other Scenarios Affecting HY Credit Spread (OAS)
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