Yield spread is caused by differences in credit quality, call features, tax treatment or maturity.
Absolute yield spread
= Yield of bond - Yield of reference bond.(in basis point)
Problem: may stay same even if interest rate are rising or falling and cause misleading as spread is changing if in %
Relative yield spread
= Absolute yield spread / Yield of the reference bond
As a % of the reference bond, better basis for comparison over time than absolute spread & of the reference yield
Yield ratio
= Yield of bond / Yield of reference bond.= relative yield spread +1
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