Investing · General financial education

Credit spread as an idea

The credit spread is the yield gap between a bond and a lower-risk comparison bond of the same maturity. The comparison is often a government bond.

In more detail

FINRA defines the spread as the difference between the yields of two bonds, usually in basis points. One basis point is 0.01 percent. The credit spread compares a yield with a relatively low-risk government bond of the same maturity. A wider gap means the market is asking for more extra yield at that moment. It is a price difference, not an instruction to buy or sell.

Background

Read next to bonds, risk and interest: the rating, the maturity and the chosen reference belong in the definition. Finmon names no issuer and no 'cheap' gap.

An example

A company bond yields more than a government bond of the same maturity. The gap in basis points is the credit spread of that comparison. Finmon does not say whether the gap is 'too wide'.

A common misconception

A wide credit spread is already the statement that the bond is undervalued.

It is the yield gap versus a lower-risk bond of the same maturity. Calling that gap an opportunity would be a separate claim, and Finmon does not make it.

Source: FINRA · Bond spreads. Last reviewed: 2026-11-01. Editorially reviewed on 2026-11-01. Next review 2027-11-01. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.