• The yield spread is the difference between the quoted rate of return on various debt instruments, which often have different maturities, credit ratings and risk.

  • The spread is easy to calculate as you subtract the return of one from the return of the other in percentage or basis points.
  • Yield spreads are often quoted in terms of yield versus US Treasury bonds or yield versus AAA corporate bonds.
  • When yield spreads widen or narrow, it can signal changes in the underlying economy or financial markets.