Difference between two bond yields, used to compare maturity structure, credit conditions, or relative value.
A yield spread is the difference between two yields. In fixed income, investors use it as a quick way to compare bonds, benchmark curves, or points along the same curve.
If one bond yields 5.20% and another yields 4.40%, the yield spread is 0.80%, or 80 basis points.
Yield spread matters because it turns a relative pricing question into one number investors can compare quickly. Depending on the two securities chosen, the spread can reflect:
| Measure | What it compares | Best use | Main limitation |
|---|---|---|---|
| Yield Spread | Any two yields | General relative-yield comparison | Too broad without context |
| Credit Spread | Risky bond versus safer benchmark | Credit analysis and default-risk pricing | Not every yield spread is a credit spread |
| G-Spread | Bond versus a similar-maturity government yield | Quick government-benchmark comparison | Only one benchmark point |
| Z-Spread | Bond price versus the full spot curve | Full-curve spread analysis | More technical and model-dependent |
A desk might discuss:
That is why the term is useful, but also why it always needs context.
Suppose:
4.30%4.75%The 10-year minus 2-year spread is 45 basis points. Investors use that single number as a shorthand description of one part of the yield curve.
The meaning depends on which yields you compare.
Sometimes it signals stress. Other times it simply reflects longer maturity, higher coupon structure, or a different benchmark choice.