Economics Bonds Questions
The yield of a bond refers to the annual return on investment that an investor receives from holding the bond. It is usually expressed as a percentage of the bond's face value.
On the other hand, the yield spread of a bond is the difference between the yield of that bond and the yield of a benchmark bond with a similar maturity. It is used to measure the risk premium associated with a particular bond compared to the benchmark bond. A positive yield spread indicates that the bond has a higher yield than the benchmark bond, suggesting that it carries a higher level of risk. Conversely, a negative yield spread suggests that the bond has a lower yield than the benchmark bond, indicating that it is considered less risky.