G-spread yield spreads defines the difference in yields between pure government agency bonds and corporate bonds.
A yield spread is the variance between yields on differing debt tools of differing maturities, issuer,credit ratings or risk level, measured by subtracting the yield of one tool from the other. This difference is usually conveyed as basis points (bps) or percentage points.
"G-spread also known as nominal spread is the difference between yield on Treasury Bonds and yield on corporate bonds of same maturity." Because Treasury Bonds can be supposed to have zero non payment risk, the difference between yield on corporate bonds and Treasury bonds shows the non payment risk.
"G-Spread = Yc − Yg
Where Yc is the yield on non-treasury bond and Yg is the yield on government bond of the same maturity."
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