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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

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References in periodicals archive

Abstract: This paper presents empirical evidence on the role of yield spread in predicting inflation and output growth in Pakistan.

Predicting Output Growth and Inflation in Pakistan: The Role of Yield Spread

Ball and Croushore show that the SPF output forecasts are inefficient with respect to changes in monetary policy, as measured by changes in real interest rates, while Rudebusch and Williams show that the forecasts are inefficient with respect to the yield spread. In this paper, the authors investigate the robustness of both claims of inefficiency, using real-time data and exploring the impact of alternative sample periods on the results.

Do GDP forecasts respond efficiently to changes in interest rates?

For the fourth consecutive week, the two largest positive contributions over the past year were made by the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII) and by the yield spread between that same index and the 10-year U.S.

St. Louis Fed's Financial Stress Index Declines for Second Week in a Row

The yield spread over US treasuries would be much larger if oil price continues to be at low levels, but if it increase to $50 per barrel level, yields spreads could be in the range of 200-250 bps over US Treasuries.

Debt financing to grow across Middle East in 2016

We use past values of the yield spread and GDP growth to project what real GDP will be in the future.

Yield curve and predicted GDP growth, October 2014

The S&P closed the week at 1,967.90 while the yield spread tightened slightly to 107 basis points.

Interested in getting back into stocks? Do a little check on junk spreads first

We use a sample of 13,037 yield spread observations of industrial issuers from 1994 to 2005.

Board ties and the cost of corporate debt

Pairwise cointegration tests are conducted by regressing each country's yield spread versus Germany on a constant term [[beta].sub.0].

A time-series postmortem on Eurozone financial integration and the debt crisis: modeling and policy implications

The yield spread between this issue and a longer-term bond of Promsvyazbank (-/Ba2/BB-) PROMBK-19 has been in place only since June 26.

UFS Investment Company - NOMOS-BANK - Opportunity to Gain Outperforming Yield with Minimal Risks, Jul 9, 2013

The economic fundamentals include the federal funds rate and interest rate spreads, such as the 1-year-1-month LIBOR spread and the 10-year nominal Treasury--10-year Treasury Inflation-Protected Securities (TIPS) yield spread. These variables are intended to capture inflation expectations and uncertainty due to monetary policy.

Disentangling diverse measures: a survey of financial stress indexes