Credit Spread Calculator
Calculate credit spread between corporate and government bonds to assess credit quality and risk
Calculate Credit Spread
Yield to maturity of the corporate bond
Yield to maturity of comparable government bond
Credit Spread Results
Formula used: Credit Spread = Corporate Bond Yield - Government Bond Yield
Calculation: 5.30% - 1.80% = 3.50%
Credit Quality: Poor Credit Quality
Risk Level: High Risk
Risk Analysis
Example Calculation
Corporate Bond Analysis
Corporate Bond Yield: 5.3%
Government Bond Yield: 1.8%
Same Maturity: 10 years
Credit Spread Calculation
Credit Spread = 5.3% - 1.8% = 3.5%
Basis Points = 3.5% × 100 = 350 basis points
Credit Quality: Fair (BB/B rating)
Risk Level: Moderate to High Risk
Credit Spread Guide
0-1.5%
Excellent to Good Quality
Investment grade bonds
1.5-3.0%
Fair Quality
High yield bonds
3.0%+
Poor Quality
Junk bonds, high risk
Investment Tips
Compare bonds with same maturity
Wider spreads = higher risk and return
Monitor spread changes over time
Consider company fundamentals too
Understanding Credit Spread
What is Credit Spread?
Credit spread is the difference in yield between a corporate bond and a government bond of the same maturity. It represents the additional compensation investors require for taking on the credit risk of the corporate issuer.
Key Uses
- •Credit Quality Assessment: Measure default risk
- •Investment Decisions: Compare bond attractiveness
- •Risk Management: Monitor credit deterioration
- •Pricing: Determine fair bond value
Calculation Formula
Credit Spread = Corporate Bond Yield - Government Bond Yield
Factors Affecting Credit Spread
- Company's Financial Health: Debt levels, profitability
- Industry Risk: Sector-specific challenges
- Economic Conditions: Recession increases spreads
- Market Liquidity: Less liquid bonds have wider spreads
- Time to Maturity: Longer maturity typically means wider spreads
Note: Credit spreads widen during economic uncertainty and narrow during good times