Yield Spread

A Yield Spread is the difference between the yield offered by 'safe' government bonds, and that offered by riskier corporate bonds issued by companies.

As a result of companies generally being more exposed to insolvency than governments, investors demand higher interest payments for corporate bonds to reward them for the extra risk they take. Bonds are rated by agencies such as Standard & Poor's or Moody's, and as ratings on bonds slide down the scale from AAA status, the yield spread will widen as those bonds are deemed riskier. By the same token if the yield spread on a particular bond is narrowing, it suggests the risk of owning the bond is falling.

Yield spread is also known as credit spread.

What to do if you need more help

If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.

We hope you found this information useful.

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