CDS spread

A CDS (Credit Default Swap) spread is the cost to insure against a borrower—such as a company or country—defaulting on its debt. Think of it like an insurance premium: the higher the spread, the greater the perceived risk of default, and vice versa. Investors pay this spread regularly to protect themselves; if the borrower defaults, the insurer pays out. The spread reflects market confidence: tighter spreads indicate perceived safety, while wider spreads signal higher risk. It’s a key indicator used to gauge creditworthiness and market sentiment about a borrower’s ability to meet its debt obligations.