What is spread of yields? Back to list

Member SinceJul 08, 2021

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Sterling

Aug 02, 2022 a 12:11
Yield spreads, like bid and ask spreads, are calculated for different assets. Bonds are the most commonly associated asset with yield spreads, and they are calculated in this manner.
A yield spread is the difference in yields between two bonds of equal size and value. As a result, if one bond has a yield of 10% and another has a yield of 5%, the yield spread is only 5%.
This is also applicable to Forex. For example, a high yield spread would look like this. Assume the yield curve for EUR/USD is 20% and the yield curve for EUR/GBP is 5%. Because these are both major currency pairs, calculating the yield spread on them is possible. The yield spread in this case would be 15%, indicating that more people will start to transfer to the EUR/USD pair in search of higher payouts.

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