credit spread shock
What it checks
Watch the corporate-bond credit spread — when it compresses sharply, high-beta names rip; when it widens sharply, they get hammered. We trade the regime change.
Mechanism
Gilchrist-Zakrajsek 2012 AER show the excess-bond-premium component of credit spreads predicts equity returns at 1-3mo horizons with R² up to 12%. We use raw BAA-10Y (Moody's BAA corp minus 10Y Treasury) from FRED as the cheap proxy. Widening shock = risk-off pressure (short high-beta names with downtrend); sharp compression = risk-on regime (long beta names with uptrend).
Signal rule
126d rolling z of daily BAA-10Y from fred_macro; long when z<-1.0 + 60d uptrend, short when z>1.5 + 60d downtrend.
Data dependencies
daily_pricesAdjusted-close OHLCV for every US-listed ticker; primary price feed.
fred_macroWorker data table — see services/worker schema.
Expected edge
- Paper alpha
- R² 12% on 1mo equity returns from EBP component
- Paper window
- 1973-2009
Gilchrist-Zakrajsek 2012: 1mo R² up to 12% for EBP; 5-10% ann. macro-conditional spread on high-beta names.
Example tickers where this is likely to fire
Illustrative only — the signal fires based on the live data, not a fixed list.
Related families
macro regimeMacroBeyond regime_overlay (#10) which uses VIX + SPY trend, this family keys off the macro regime detected from FRED data: term-spread inversion (10Y−2Y < 0), credit-spread widening or compression (BAA−10Y z), and Fed funds cycle direction. Single-name version: gate the simple long-trend signal (SMA50 > SMA200) on the FRED macro regime — full long only in risk-on, half-size in neutral, flat in risk-off, short in inversion.
vrp vix termMacroVIX term-structure slope (VIX9D / VIX vs VIX / VIX3M) is a coincident indicator of market regime. Stay long the stock when the term structure is in contango (VIX < VIX3M) — backwardation signals stress. Smoothing variants (raw vs 5-day rolling mean) sweep to find the cleanest version.
pre fomc driftMacroPre-FOMC drift: SPX abnormally returns ~+0.50% in the 24h before each scheduled FOMC announcement (1994-2011 sample, Lucca-Moench 2015 NY Fed SR-512). The 2024 Applied Economics update finds the drift persists post-2011 but concentrates on press-conference meetings (every meeting since 2019). This family extends the basic version by sweeping multiple pre-windows (1d/2d/3d before), a pre+post combo (long ~3d pre, short 1d post the fade), and a press-conference meeting filter.
Explore credit spread shock on alphactor.ai
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