19:34 Apr 7, 2011
I don't know how long to drivel on about this, but I probably should mention one other thing. These spreads are for 'debt instruments', the biggest class is bonds, but they can be any other kind of debt (collateralised debt obligations, etc.), but there are also bid/offer spreads for equities (stocks), currencies, commodities, etc. "spreads"here does not refer to those, only debt instruments.
Ceteris paribus, the spreads of debt instruments will fluctuate mostly in the same direction in a given economic context. In a deteriorating economy, investors will demand higher yields because more risk of default is perceived. In a recovering economy, investors will be less anxious about possible default, and will accept lower compensation for the risk they are incurring.
People reading this kind of text will understand all that, and what you mean but just saying 'spreads'. |