SLOOS Lending Standards vs Credit Spreads
SLOOS lending standards vs credit spreads — which matters more for the credit cycle?
One-year comparison
Left axis: Credit Spreads (green) · Right axis: SLOOS Lending (blue)
The analysis
SLOOS measures bank-lender behavior — actual lending standards. Credit spreads measure bond-market pricing of default risk. SLOOS leads by 6-9 months because loan-standard changes take time to translate into credit contractions. Credit spreads react in real-time to market events. Use SLOOS for forecasting; credit spreads for confirmation.
Track high-yield credit spreads (ICE BofA HY OAS). Widening spreads signal rising default risk and are a classic recession leading indicator.
Track bank lending standards from the Fed's Senior Loan Officer Survey. Tightening credit means less lending and slower economic growth.