Finance glossary
Credit Spread
Definition
The extra yield a risky bond offers over a safe benchmark.
A credit spread is the yield difference between a corporate bond and a comparable government bond, compensating investors for default risk. Spreads widen when fear rises and the economy weakens, and tighten when confidence returns, making them a useful market sentiment gauge.
In a sentence
As recession fears grew, the credit spread between junk bonds and Treasuries blew out.
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