Nominal spread
Principles of Finance glossary · Valuation of Bonds & Stocks
Definition
The yield difference between a corporate bond and a Treasury of matching maturity.
Nominal spread in plain English
When you lend money by buying a bond, you want to be paid more for taking on more risk. A U.S. Treasury bond is treated as the safest possible loan, so its yield (the annual return you earn) is the baseline. The nominal spread is simply how much EXTRA yield a company's bond pays over a Treasury that pays you back at the same time. If a Treasury yields 4% and a company's 10-year bond yields 6%, the nominal spread is 2 percentage points (often said as "200 basis points") — that extra 2% is your reward for the chance the company might not pay you back.
Learn these first
Related Principles of Finance terms
Principles of Finance practice questions · Principles of Finance flashcards · Principles of Finance study guide