Yield Spread

Yield spread is the difference in interest rates between two debt securities, usually government and corporate bonds, or bonds with different maturity dates. It reflects the perceived risk and market conditions; a wider spread suggests higher risk or uncertainty, while a narrower spread indicates confidence and stability. Investors use yield spreads to assess relative risk and make informed decisions about where to allocate resources. It serves as a key indicator of economic health and market sentiment, highlighting differences in risk premiums demanded by investors for various investment options.