U.S. high-yield bond stress is heating up! Spreads on CCC-rated and below bonds rise to 12%, a near four-year high, as credit market risks spread rapidly.

According to U.S. market research firm The Kobeissi Letter, stress in the U.S. high-yield credit market is intensifying markedly, with risk premiums on corporate bonds carrying the lowest credit ratings having climbed to their highest level since late 2022. At the same time, varying degrees of deterioration have also emerged in commercial real estate, private credit, and the credit default swap (CDS) markets of large technology companies, fueling concerns that the U.S. credit environment could come under further strain. Data cited by The Kobeissi Letter shows that credit spreads on U.S. corporate bonds rated CCC and below have widened to 12%, surpassing the interim high of 11.4% set in April 2025 and marking the highest level since November 2022. Over the past five months, the spread has widened by nearly 300 basis points cumulatively. Still, the current level remains well below the peak of 19.6% during the 2020 COVID-19 crisis. Although a number of severely distressed issuers have contributed significantly to the overall spread widening, Deer Point Macro notes that stress is gradually spreading from individual high-risk companies to the broader high-yield bond market. Over the past month, the median spread of CCC-rated bond constituents widened by about 66 basis points, indicating a more systemic repricing is underway in the market rather than being concentrated among a handful of troubled issuers. Specific bonds are sending similar signals. A growing number of bonds that previously traded at 80 to 90 cents on the dollar have now fallen to around 60 cents. This suggests that weakness in the high-yield bond market is broadening. The key question the market is now focused on is whether this round of adjustment merely represents credit spreads returning to normal levels from previously historic lows, or whether it reflects deeper underlying stress in corporate fundamentals. As the credit market comes under pressure, the U.S. Treasury market has also experienced sustained selling. Last week, the 10-year Treasury yield rose to its highest level since 2002, and elevated risk-free rates are further driving up corporate financing and refinancing costs while weighing on credit asset valuations. Deterioration in commercial real estate-related debt is particularly pronounced. According to data from Bret Jensen, head of The Biotech Forum, the overall delinquency rate for commercial mortgage-backed securities (CMBS) rose to 8.02% in September, roughly six times the low seen during the COVID-19 pandemic. Among them, the delinquency rate for office mortgages exceeded 12%, while the delinquency rate in the multifamily residential sector also recently broke above 8%. High refinancing costs, combined with declining rents in some oversupplied markets, are further increasing the debt-servicing pressure on commercial real estate borrowers. The private credit market is also flashing warning signals. Jensen noted that the default rate in this sector rose to a record level in the second quarter. Meanwhile, as the scale of AI infrastructure investment continues to swell, CDS spreads for some large technology companies have also widened notably, indicating that investors are beginning to pay more attention to the credit risks that massive capital expenditures and debt financing may bring. Among them, the CDS spread for Oracle Corporation (ORCL.US), which has undertaken a large amount of AI infrastructure investment, has risen to a historic high. CDS spreads for Alphabet Inc. Class C parent Alphabet (GOOGL.US, GOOG.US), Microsoft Corporation (MSFT.US), Amazon.com, Inc. (AMZN.US), Meta (META.US), NVIDIA Corporation (NVDA.US), and SpaceX (SPCX.US) have also widened. As technology companies continue to pour enormous sums into building data centers, chips, and related AI infrastructure, market attention is rising over the financing costs and balance sheet pressure of this capital expenditure cycle. From low-rated corporate bonds to commercial real estate, private credit, and the CDS market for large technology companies, multiple credit sectors have recently shown signs of rising stress simultaneously. In particular, against the backdrop of Treasury yields remaining elevated, persistently climbing financing costs could further test the debt-servicing capacity of highly leveraged borrowers, and whether high-yield credit spreads can stabilize will also become an important indicator for gauging whether stress in the U.S. credit market is spreading further.