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what does corporate bond spread mean?

Secondary Mkt 1420 views 1 replies

what does corporate bond spread mean. also tell me the concept of 'basis points'.

Replies (1)

i hope you're aware about the risk return concept? It basically implies that higher risk you take should be compensated by higher return. When you take a bond that is issued by the government, it has no risk since the government does not default on it's debt. When you take up a corporate bond, there is a risk of default and hence the return on such bonds higher to compensate you for the risk .

 

The corporate bond spread is basically the difference in returns you get on goverment bonds and corporate bonds.

 

And basis point - A unit that is equal to 1/100th of 1%


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