Nominal

Also known as the yield to maturity spread, basic relative value


This provides a very simple way of comparing 2 bonds with the same maturity.
There are two different benchmarks you can use to get a nominal spread:
The problem with this method is that the reinvestment of coupon income is assumed to be at the same yield.
This is incorrect particularly when there is a marked yield curve such that cash flows of different maturities should be discounted at different rates


Treasury Spread

Also known as bond spread, government bond spread, g-spread, treasury spread, credit spread, yield spread, traditional yield spread


This indicates the credit spread relative to the government bonds market.
This nominal spread is the difference between the yield to maturity of a bond and its equivalent government bond with the same security.


Lets assume that US Treasury notes currently have a yield of 3.39%
And the yield on a Microsoft bond is 4.27%
The credit spread of the Microsoft bond is (4.27 - 3.39) = 0.88% or 88 basis points


Swap Spread

Also known as interest rate swap spread, I-spread, ISPRD


This indicates the credit spread relative to the interest rate swaps market.
This nominal spread is the difference between the yield to maturity of a bond and its yield from an approripate interest rate curve for the same maturity date.


In euro fixed income market there is an additional concern; there are many governments who issue bonds and they have differing yield levels
While some participants may compare credit spreads through looking at bonds relative to government issues from major countries such as Germany or France
It is increasingly common to use the "nation-neutral" euro swap curve as the foundation for companies.



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