A “credit spread” compares the yield on credit-risky debt with a benchmark yield of comparable maturity. Federal Reserve discussion notes that corporate-bond spreads compensate for default and liquidity risks rather than representing a pure default probability.
ReviewedEvidence1 sourceSectionPhrases & Idioms
Quick answer
A credit spread is the yield spread on debt such as corporate bonds over a comparable lower-risk benchmark such as similar-maturity Treasury securities.
Key details
Canonical Formcredit spread
Core MeaningA credit spread is the yield spread on debt such as corporate bonds over a comparable lower-risk benchmark such as similar-maturity Treasury securities.
Further guidance
History Boundary
Current authoritative financial meaning is published without claiming an exact inventor, coinage date, or absolute first use.
Meaning
A credit spread is the yield spread on debt such as corporate bonds over a comparable lower-risk benchmark such as similar-maturity Treasury securities.
Usage Boundary
Credit spreads can contain compensation for default, recovery, liquidity, and other risks, so they should not be read as a one-for-one measure of expected default loss.
Sources and evidence
Sources are shown with the role they play in this guide. Historical or style-sensitive claims are kept within the evidence boundary described above.
Average Effective Spread is a current Regulation NMS defined term. This guide preserves the specific U.S. securities-rule scope instead of substituting an ordinary-language meaning.
Average Percentage Effective Spread is a current Regulation NMS defined metric and should be read with the rule-defined average effective spread and average midpoint components.
Average Percentage Realized Spread is a current Regulation NMS defined metric; the page keeps its rule-defined denominator and does not substitute a generic percentage-spread meaning.
Average Quoted Spread is a current Regulation NMS defined term. This guide preserves share weighting and the special executable-time rule for midpoint-or-better limit-order executions.
Average Realized Spread is a current Regulation NMS defined term. This guide preserves its share weighting, buy/sell direction, post-execution timing, and final-trading-hours midpoint provision.
A bid-ask spread is the gap between quoted buying and selling prices and is one market-liquidity measure; wider spreads generally imply greater trading cost or compensation for liquidity provision. Treat the spread as one dimension of liquidity, not as a complete measure of market liquidity, depth, or price impact.
A “credit crunch” refers to a sharp restriction in credit supply or availability, not merely any period when borrowing declines. Federal Reserve discussion emphasizes the difficulty of separating lender-side supply restraint from weaker loan demand or deteriorating borrower quality.
Effective spread is an execution-cost measure based on the distance between an execution price and the contemporaneous quote midpoint, conventionally expressed on a round-trip basis. Do not substitute the displayed quoted spread: price improvement or executions away from the quote can make effective spread differ from quoted spread.
