Credit Spread Calculator
Subtract the risk-free yield from a corporate bond yield to find the credit spread, the extra return for taking on default risk.
- Free
- No sign-up
Enter the two yields to see the credit spread.
Worked example
With these example inputs:
- Corporate bond yield6.5%
- Risk-free yield4%
Credit spread: 2.5%
- If the first figure were 10% higher3.15%
Frequently asked questions
What is a credit spread?
It is the difference between a corporate bond's yield and a comparable risk-free yield. A 6.5% corporate yield against a 4% treasury is a 2.5% spread.
Why do spreads widen?
Spreads widen when investors see more default risk or demand more compensation, often in downturns. Narrowing spreads usually signal improving confidence.
What is a credit spread in simple terms?
It is the extra yield a risky bond pays over a safe one. You subtract the risk-free yield from the corporate bond yield. The gap rewards investors for the chance the bond defaults. A wider gap means the market sees more risk.
What is the risk-free yield I should use?
It is the yield on the safest bonds, usually strong government debt. These are treated as having almost no chance of default. Match its maturity to the corporate bond you are checking. That keeps the spread a fair comparison of risk.
Why do credit spreads widen and narrow?
Spreads widen when investors grow nervous and demand more reward. This often happens in a downturn or a crisis. Spreads narrow when confidence returns and risk feels lower. So the spread can act as a gauge of market mood.