Yield spread

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Yield spread

The difference in yield between different security issues usually securities of different credit quality.

Yield Spread

The difference in yield between two bonds or other debt securities with different credit quality. For example, an investment grade bond and a junk bond have different yields to compensate the bondholder for the risk (or lack of risk). The difference between these is called the yield spread.

yield spread

The difference in yield, at a given time, between two bonds or between different segments of the bond market. For example, the yield spread between AAA-rated bonds and A-rated bonds may be one half of 1% at a particular time. Likewise, the yield spread between long-term taxable and nontaxable bonds may be 2%. Yield spread may be caused by any of various factors including maturity difference, risk difference, or taxability difference.

Yield spread.

Yield spread describes the difference between the yields on two different debt instruments. For example, you can calculate the yield spread on two bonds, by subtracting the yield on one bond from the yield on the other.

Yield spread is helpful in comparing bonds with different maturities, credit ratings, and tax status. In general, securities with longer maturities tend to have higher yields than those with shorter maturities. And securities with higher credit ratings have lower yields than those with lower ratings.

References in periodicals archive ?
Higher valuations and narrow yield spreads mean that increased volatility among Real Estate Investment Trusts will likely persist this year as short-term traders move in and out of the REIT market.
Greek yield spreads (with Germany) rose sharply last week, Portuguese yields have turned higher, and the Spanish spread has also started to widen.
However, with GDP projections now positive and with investors appetite for risk returning we will see yield spreads narrowing over a sustained period which will result in secondary assets performing better on a total return basis.
Greece sold six-month T-bills at a slightly higher yield on Tuesday than a previous February auction, its first borrowing sortie after a three-notch Moody's downgrade to B1 raised yield spreads to near peak crisis levels.
An important research question examined in the credit risk literature focuses on the proportion of corporate yield spreads attributed to default risk.
The level of the yield spreads and changes in these levels were the primary concern.
WHAT ARE YIELD SPREADS AND MIGHT THEY TRACK MARKET INFLATION EXPECTATIONS?
Key factors in this optimistic outlook include strong demand against limited supply and tightening yield spreads in other asset types, both set against the backdrop of a solid economy.
However, foreign investors buy the bonds and then cash in on yield spreads to make a profit.
Inter-Bank Market Rates: In the final Asian trade, It was hard to find a pulse in the currency market as dealers bedded down for the Christmas holidays, though the mood remains bullish for more dollar gains in the New Year as yield spreads widen in its favour.
Summary: Shrinking liquidity and widening yield spreads could dampen demand