Yield Spread

Yield spread means the difference between yields on two bonds or types of debt. In simple terms, it shows how much more yield one bond offers compared with another. Yield spread is important because it can reveal differences in risk, maturity, liquidity, or investor demand. Wider spreads can suggest higher perceived risk or tighter credit conditions. For example, if a corporate bond yields 6% and a Treasury bond yields 4%, the yield spread is 2 percentage points. Yield spread is not the same as total yield. It measures the gap between yields, not the full return of one bond.