Credit Spread
Credit & DebtThe extra yield a corporate bond pays over a government bond of the same maturity, compensating for default risk and lower liquidity.
Formula
Credit Spread = Corporate Bond Yield - G-Sec Yield (same maturity)
Why it matters
Spreads are a live market vote on credit risk. Widening spreads warn of stress long before rating agencies act.
Indian example
Related terms
Learn the concept
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