"- Yield Spread: Relationship between bond yields and particular features on various bonds such as quality, callability and tax. These are often calculated among different bonds holding maturity constant. - The yield spread is the difference between the yield on a bond and the yield on a similar risk free debt instrument - The yield spread has advantages over the use of changes in a short rate alone, since the effects of external shocks can be dampened, leading to a better indicator of deliberate policy actions. - There has been a good deal of recent interest in the link between yield spreads and aggregate economic activity, As it has been found to be one of the most useful business cycle leading indicators and as an indicator of the direction of monetary policy. Source: http://in.docsity.com/en-docs/Interest_Rate_-_Security_Analysis_and_Portfolio_Management_-_Solved_Quiz_"
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