Credit spreads widen when investors worry about defaults (for example in recessions) and narrow when confidence is high. Investment-grade spreads are often around 1–2 percentage points; high-yield spreads 3–6 or more.
How to use the Credit Spread Calculator
- Corporate bond yield
- Government bond yield
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the corporate bond yield and the government bond yield of the same maturity.
Tips
- Check whether rates are quoted annually, semi-annually or per period.
- Bond prices and yields move in opposite directions – a higher yield means a lower price.
- Use the bond’s clean price (without accrued interest) for yield calculations.
- Credit ratios are most useful when tracked over several years.
Common mistakes to avoid
- Confusing the coupon rate with the yield.
- Using the face value instead of the market price.
- Forgetting that callable bonds may be redeemed before maturity.
Inputs explained
| Field | What to enter |
|---|---|
| Corporate bond yield | In % |
| Government bond yield | In % |
What each result means
- Credit spread = [Corporate bond yield] – [Government bond yield]
- Credit spread in basis points = ([Corporate bond yield] – [Government bond yield])×100
Example values
How the main result changes when Corporate bond yield changes and everything else stays at the example values above:
| Corporate bond yield (%) | Credit spread (%) |
|---|---|
| 3.05 | -1.25 |
| 4.57 | 0.27 |
| 6.1 | 1.8 |
| 7.63 | 3.33 |
| 9.15 | 4.85 |
| 12.2 | 7.9 |
Formula
Credit spread = corporate bond yield − government bond yieldIn basis points = spread × 100Worked example
Inputs — Corporate bond yield: 6.1 %; Government bond yield: 4.3 %.
Results — Credit spread = 1.8 %; Credit spread in basis points = 180 bps.
Frequently asked questions
What is a credit spread?
The extra yield over a government bond for bearing credit risk.
What does a widening spread mean?
Investors see more default risk.
Is "credit spread" also an options strategy?
Yes – selling one option and buying another for a net credit; this calculator covers bond spreads.
What formula does the Credit Spread Calculator use?
Credit spread = corporate bond yield − government bond yield.