Default Swap Spread

A default swap spread is the difference in yield between a country's or company's debt and a risk-free benchmark, like U.S. Treasury bonds. It reflects the market's assessment of the issuer’s credit risk—higher spreads indicate higher perceived risk of default. Essentially, it shows how much extra compensation investors require to take on the possibility that the issuer might fail to pay back their debt. This spread helps investors gauge credit risk and compare the safety of different investments.