medium · Asset-Backed Securities
A front-loaded amortizing Auto ABS bond is priced on a steeply upward-sloping spot curve. Define its nominal spread as the spread over the single benchmark yield at the bond's weighted-average life.
Holding the bond's price and cash flows fixed, how will the constant Z-spread over the full spot curve likely compare with that nominal spread?
- Not directionally related
- Higher
- Lower
- Identical
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