United States

Go to the UK site

Contact us:
helping-advisors@russell.com 800-787-7354
Site Navigation

Corporate Debt (OAS)

Market indicator

Historical graph of the Option-Adjusted Spread (OAS) on investment-grade corporate debt

To view the interactive version of the Corporate Debt (OAS) graph, JavaScript must be enabled and you need the latest version of the Adobe Flash Player.

Current reading and trend (as of 9/30/2009)

  • September saw option adjusted spreads narrow for the 6th consecutive month, implying that conditions continue to improve in the investment grade corporate debt market.
  • OAS still remains at elevated levels. However, at 2.18%, it has come in significantly from its November 2008 high of 6.07% and now stands much closer to its long-term typical range.
  • We believe this is a good signal that investors are becoming more willing to take risks with their portfolios.

What is it?

  • An OAS (Option-Adjusted Spread) is a measurement tool for evaluating yield differences between similar-maturity fixed-income products with different embedded options.
  • The OAS we're using measures the difference between interest rates for similar-maturity investment-grade corporate bonds and treasury bonds.

Why is it important?

  • The OAS on investment grade corporate debt is viewed as a gauge of credit spreads.

How do we interpret it?

  • A higher OAS implies greater anticipated default risk and therefore a higher risk premium.
  • A lower OAS implies a greater availability of credit and more operational flexibility.

Typical historical range

  • Historically, 90% of month-end OAS values ranged from 0.51% to 1.87%.
  • From June 30, 1989, through the first three weeks of 2009, the average difference between treasury and corporate interest rates was about 1.9%. The previous record difference before 2008 was 3.7% in October 2002.
Footnotes

The source of our data is FactSet.

What's the state of the economy?

Economic Recovery Dashboard

Article actions
Dashboard Updates
Next update November 22

Subscribe to updates

Enter your email below to be notified of dashboard updates

e.g. yourname@company.com

We will only use your email address to update you on the dashboard.

About Russell.com/Helping-Advisors

This site is brought to you by Russell Investments — helping advisors serve clients and build successful practices since 1988. Russell believes that investors are best served by qualified financial advisors. We created Helping-Advisors because we saw the need for a resource advisors could use to get their clients and their business through this unprecedented market environment.

Learn more about Russell Investments

Important information and disclosures

Data stated is historical and not a guarantee of future results.

Russell Investments or its affiliates make no representations regarding the data that results dependent upon such information and hereby disclaim all warranties related to information and results are dependent hereon, including but not limited to warranties of merchantability or fitness for any particular purpose.

Data displayed in the Economic Recovery Dashboard are reflective of current data as provided by the data sources including any revisions to previous data. These revisions may change historic data points and historic ranges for some or all indicators. These changes are usually due to seasonal adjustments to previously supplied data.

The information, analyses and opinions set forth herein are intended to serve as general information only and should not be relied upon by any individual or entity as advice or recommendations specific to that individual entity. It is not intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Anyone using this material should consult with their own attorney, accountant, financial or tax or consultants on whom they rely for investment advice specific to their own circumstances.

This analysis is not meant to serve as a direct prediction regarding the future performance of any economic or financial market. Similarly, they are in no way intended to predict or guarantee future investment performance of any sort. Other economic or financial market indictors not considered in this analysis may produce different results.

This analysis represents an economic analysis utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

Indexes shown are economic indicators and are for comparative purposes only. They are not meant to represent any actual investment. Indexes are unmanaged and cannot be invested in directly.

This is not an offer, solicitation or recommendation to purchase any security or the services of any organization.

Please remember that all investment markets carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative returns.

Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets.

No investment strategy can guarantee a profit or protect against a loss in a declining market.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.

Russell Investment Group, a Washington USA corporation, operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.

The Russell logo is a trademark and service mark of Russell Investments.

Russell Financial Services, Inc., member FINRA (www.finra.org), part of Russell Investments.

First used February 2009
Revised October 2009
RFS 09-2525