Credit Spread
Definition
What is Credit Spread?
The extra yield a debt securityA financial instrument representing money borrowed by an issuer and owed to investors. offers over a lower-risk reference securityA tradable financial claim or ownership interest, such as a share, bond, or fund unit. of similar maturityThe date when a debt investment's principal is scheduled to be repaid..
Example in practice
How This Looks in Practice
A corporate bondA bond issued by a company. yields 4 percentage points above a government bondA debt security issued by a government or government treasury..
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Related Terms
Bond
A debt security through which an investor lends money to an issuer in return for promised payments.
Fixed IncomeIssuer
The government, company, or organisation that creates and sells a security.
Fixed IncomeFace Value
The principal amount stated on a bond and usually repaid at maturity.
Money MarketsTreasury Bill
A short-term government debt instrument usually issued at a discount and repaid at face value.