medium · Debt Capital Markets pricing-yields-curve
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 fully strips out the value of any and all embedded options from the figure.
- Because it references the swap curve, which is the natural benchmark for bank funding and credit products.
- Because outstanding government bonds are simply far too illiquid to serve as a usable benchmark here.
- Because the I-spread is, by its very construction, always numerically smaller than the related G-spread today.
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