medium · Debt Capital Markets
When quoting the spread for a high-grade financial institution bond, why is the Interpolated Spread (I-spread) often preferred over the G-spread?
- Because the I-spread strips out the value of embedded options.
- Because it references the swap curve, which is the natural benchmark for bank funding and credit products.
- Because government bonds are too illiquid to serve as a benchmark.
- Because the I-spread is always smaller than the G-spread.
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