what does corporate bond spread mean. also tell me the concept of 'basis points'.
CA Mrinal Gunjan (CA) (131 Points)
25 April 2010what does corporate bond spread mean. also tell me the concept of 'basis points'.
Dhruv
(Chartered Accountant)
(308 Points)
Replied 25 April 2010
i hope you're aware about the risk return concept? It basically implies that higher risk you take should be compensated by higher return. When you take a bond that is issued by the government, it has no risk since the government does not default on it's debt. When you take up a corporate bond, there is a risk of default and hence the return on such bonds higher to compensate you for the risk .
The corporate bond spread is basically the difference in returns you get on goverment bonds and corporate bonds.
And basis point - A unit that is equal to 1/100th of 1%
Live class on PF & ESI Enrollment & Returns Filing(with recording)
CAclubindia
