This paper is one of the first to examine the empirical determinants of credit spread changes on corporate bonds in the Australian market. Eight different credit spread changes are analysed corresponding to bonds of four different credit ratings and four different maturity ranges. We investigate the explanatory power of several variables derived from structural models of corporate default. Also included in the analysis are variables designed to capture the liquidity component of the credit spread. Results indicate that changes in the spot rate and changes in the slope of the yield curve are the most important determinants of credit spread changes. Overall, the model is able to describe a large proportion of the variation in credit spread changes – up to 60 percent. The model provides the best fit for credit spreads in well established bond markets.