I-Spread (Swap Spread)
Computes the I-spread, the difference between a bond's yield and the interpolated swap rate of the same maturity. It measures the bond's credit premium against the swap curve, which many consider a better reference than government bonds for pricing credit. The result comes in basis points. It's a cousin of the G-spread, but uses the swap rather than the government as the comparison base. Enter the bond's yield and the swap rate of the same maturity.
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I-Spread (Swap Spread)
Computes the I-spread, the difference between a bond's yield and the interpolated swap rate of the same maturity. It measures the bond's credit premium against the swap curve, which many consider a better reference than government bonds for pricing credit. The result comes in basis points. It's a cousin of the G-spread, but uses the swap rather than the government as the comparison base. Enter the bond's yield and the swap rate of the same maturity.
The G-spread's cousin that looks at the swap
The I-spread answers the same question as the G-spread, how much credit premium a bond pays, but swaps the reference. Instead of comparing with a government bond, it compares with the swap rate of the same maturity. For many market participants, the swap curve is a cleaner base for pricing credit than government bonds, which carry their own factors.
The calculation is a simple subtraction: bond yield minus swap rate, expressed in basis points. The choice between G-spread and I-spread depends on what you consider the relevant risk-free asset. Desks that trade swaps and derivatives tend to prefer the I-spread, because it's against that curve that they actually hedge.
Enter the bond's yield and the interpolated swap rate of the same maturity, as a percentage per year. The tool returns the I-spread in basis points and percentage points. The name interpolated comes from the fact that, in practice, a swap rarely exists exactly at the bond's maturity, so the rate is estimated between the neighboring points on the curve.
Related Tools
G-Spread (Government Spread)
Computes the G-spread, the difference between a bond's yield and the yield of a government bond of comparable maturity. It's the most direct measure of a bond's credit risk premium: how much extra the market demands to lend to a corporate issuer instead of the treasury. The result comes in basis points, the standard unit of the credit market. Enter the bond's yield and the reference government bond's yield.
Spread Duration (Numerical)
Computes the spread duration of a bond by finite differences, repricing the instrument for an up and a down move in the credit spread: (V− − V+)/(2·V0·Δs). While duration measures sensitivity to changes in the risk-free rate, spread duration isolates sensitivity to the credit spread, the premium the market charges for issuer risk. It's essential for managing credit portfolios, where spread risk often dominates. Enter the base price, the prices with higher and lower spread and the spread change used.
Par Swap Rate
Computes the par swap rate from discount factors: the fixed rate that makes the interest rate swap's value zero at inception, equating the fixed and floating legs. The formula is (1 − last discount factor) divided by the sum of discount factors weighted by the period. It's a swap's market quote and the basis for marking existing positions to market. Enter the list of discount factors by payment date and the year-fraction of each period.
Z-spread (Zero-Volatility Spread)
Computes a bond's Z-spread: the constant spread added to the entire zero (spot) rate curve so the present value of its cashflows equals the market price. Unlike the nominal spread, which uses a single point, it accounts for the whole shape of the curve; for an option-free bond the Z-spread equals the OAS. Enter the cashflow times and amounts, the zero rate at each node and the price; the result is in basis points.
Bond Equivalent Yield (BEY)
Computes the Bond Equivalent Yield (BEY) of a discount instrument, such as a treasury bill sold below face value. The formula annualizes the percentage gain on the price paid on a 365-day basis: BEY = ((F − P)/P)·(365/t). It lets you compare, on the same ruler, a discount instrument with a coupon-paying bond. Be careful not to confuse it with the bank discount yield, which divides by face value and uses 360 days. Enter the face value, the purchase price and the days to maturity.
Realized Yield with Reinvestment
Computes the realized compound (horizon) yield of a bond held to maturity, taking into account the actual reinvestment rate of the coupons. Unlike YTM, which assumes coupons earn the bond's own rate, this calculation uses the rate you can actually get when reinvesting — hence the concept of reinvestment risk. It adds the future value of reinvested coupons to the principal and returns the annualized yield (BEY and effective annual). Enter the face, the coupon per period, the reinvestment rate, the periods, the purchase price and the periods per year.
The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.