A credit spread is the extra yield a corporate bond pays over a government security of the same maturity. It is the market's price for the risk that the company may not pay.
AAA bonds of large public sector companies trade at a small spread over government securities; lower-rated bonds trade at wider spreads. Spreads widen when markets worry about defaults, as after the IL&FS default in 2018.
A bond whose spread is much wider than others with the same rating may be telling you something the rating does not yet show.
Related
Related terms: Yield to maturity (YTM) · Credit rating · AAA rating
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This page is for information only. It is not investment advice, a credit rating or a recommendation to buy, sell or hold any security. Facts are taken from the issuer's own documents and the sources linked on this page; check them with the source before investing.
