Define: Yield Spread

UK Accounting Glossary

Definition: Yield Spread


Quick Summary of Yield Spread


The difference between the yields on two bonds.



What is the dictionary definition of Yield Spread?

Dictionary Definition


Yield spread is the different between the yields of two bonds.

The bonds may be of different maturity, from issuers with different risk characteristics, have different principals or offer different coupon payments.


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Full Definition of Yield Spread


The term yield spread is the name given to the difference between two different yields, or rates. What yields depends upon the context in which the term yield spread is used. In talking about the yield curve, a bond market analyst may be a comment on the yield spread between the two and ten-year treasuries. A mortgage broker is often compensated by the difference between the wholesale rate on the loan and the rate paid by the borrower, called the yield spread premium. The financial significance of a given yield spread is relative to the norm for that pair of yields. The larger the difference in yield spread from the norm, the greater the profit or loss for an entity sensitive to variation in that yield spread. A yield spread can also shrink to zero then begin to expand in the opposite direction, as happens in the case of a negative yield curve.


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Definition Sources


Definitions for Yield Spread are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • BusinessDictionary.com
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 5th May 2019.