Economics Bonds Questions
The bond yield spread refers to the difference in yield between two different types of bonds, typically government bonds and corporate bonds, or bonds with different credit ratings. It is a measure of the risk premium investors demand for holding a riskier bond compared to a safer bond. A wider bond yield spread indicates higher perceived risk and reflects the market's expectation of default or credit risk associated with the riskier bond. Conversely, a narrower bond yield spread suggests lower perceived risk and reflects higher investor confidence in the creditworthiness of the riskier bond.