G-Spread (Government Spread)
G-Spread measures the yield premium a bond offers above the risk-free government curve. Unlike a quoted spread (which uses a single benchmark tenor), G-Spread interpolates the zero curve at the bond's exact maturity. Formula: G-Spread = Bond YTM − Interpolated Govt Yield(maturity). Example: A 7-year corporate bond yields 5.50%. The interpolated UST zero rate at 7 years is 4.20%. G-Spread = 130 bp. G-Spread is simpler than Z-Spread (which discounts each cash flow separately) but gives a quick read on credit compensation. CFA L1 tests this as the most basic spread measure.
Related Terms
Z-Spread (Zero-Volatility Spread)
The constant spread added to every point on the zero curve to discount all cash flows to the bond's market price.
I-Spread (Interpolated Spread)
The difference between a bond's yield and the interpolated swap rate at the same maturity.
Option-Adjusted Spread (OAS)
Credit spread after removing the value of embedded options — computed via BDT binomial tree.
Asset Swap Spread (ASW)
The spread an investor receives over the floating rate in an asset swap, reflecting the bond's credit risk relative to the swap market.