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Please explain the meaning of "credit spreads rallied" in the following paragraph?

The volatility of the previous reporting period dissipated over the past month and credit spreads rallied across all asset classes. Cash spreads and CDS indices moved tighter across the board with higher beta sectors demonstrating the most significant recovery. It now appears the market has recognised most of factors behind the sharp market correction last month were unlikely to cause serious or widespread economic problems.

Answers (1)


I believe this means credit facilities became more widely available to potential borrowers.

03:21, 26 April 2012


so how would you interpret 'credit spreads rallied' based on that?

04:40, 26 April 2012


I just searched "credit spread" on TermWiki and found the following: generic credit spread Refers to the corporate bond spread for a particular credit rating and expiry. For example, 10-year single A corporates were priced or trading at 130 basis points above Treasuries last night, or said diffrently, 130 is the generic credit spread for 10-year single A corporates.

04:12, 26 April 2012


that may be an effect but I'm really trying to understand how credit spreads can rally. I read that credit spreads are present in option transactions and also it refers to the interest spreads in bonds. it's confusing because bonds may rally but this would make the spreads tighter, so if markets are rising how can one say that credit spreads are rallying? And what if they are referring to the credit spreads in options?

04:01, 26 April 2012

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