Nominal spread
Asset-Backed Securities glossary · Collateral & Cash Flow Modeling
Definition
Bond yield minus benchmark Treasury yield at equivalent maturity.
Nominal spread in plain English
A "spread" is just extra yield — how much more a bond pays you than a safe government bond of the same length. Nominal spread is the simplest version: take the bond's yield, subtract the yield on a U.S. Treasury that matures around the same time, and the leftover is your reward for taking extra risk. If a corporate bond yields 6% and the matching Treasury yields 4%, the nominal spread is 2% (or 200 "basis points"). It's like comparing the interest on a loan to a stranger versus a loan to your ultra-reliable friend — the gap is the danger premium.
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