How do I calculate yield spread?

How do I calculate yield spread?

To calculate yield spread, subtract the yield of a benchmark security from the yield of a bond or investment.

Can you give me an example of that?

Sure! If a corporate bond has a yield of 5% and the benchmark treasury bond has a yield of 3%, the yield spread is 5% - 3% = 2%.

What does a higher yield spread indicate?

A higher yield spread typically indicates higher risk associated with the bond compared to the benchmark, suggesting investors demand more return for taking on that risk.

Are there any factors that can affect yield spreads?

Yes, factors like credit risk, interest rate changes, and market conditions can all affect yield spreads.