A term spread is the difference between interest rates or yields at two different maturities, commonly a longer-term rate minus a shorter-term rate. A term spread is one comparison between two maturities; it is not the whole yield curve and its interpretation depends on which maturities are chosen.
ReviewedEvidence1 sourceSectionPhrases & Idioms
Quick answer
A term spread is the difference between interest rates or yields at two different maturities, commonly a longer-term rate minus a shorter-term rate.
Key details
Canonical Formterm spread
Core MeaningA term spread is the difference between interest rates or yields at two different maturities, commonly a longer-term rate minus a shorter-term rate.
Further guidance
History Boundary
Current authoritative financial meaning is published without claiming an exact inventor, coinage date, or absolute first use.
Meaning
A term spread is the difference between interest rates or yields at two different maturities, commonly a longer-term rate minus a shorter-term rate.
Usage Boundary
A term spread is one comparison between two maturities; it is not the whole yield curve and its interpretation depends on which maturities are chosen.
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.
Don’t Fear the Yield Curve↗ (opens in a new tab)Board of Governors of the Federal Reserve System · Federal Reserve discussion of the commonly cited term spread as the difference between longer- and shorter-maturity yields
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 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.
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.
