I-Spread (Interpolated Spread)

I-Spread measures the yield premium a bond offers above the interest rate swap curve at matching maturity. Unlike G-Spread (which uses the government curve), I-Spread uses the swap curve as the benchmark, making it more relevant for corporate bond relative value since swaps reflect interbank credit risk. Formula: I-Spread = Bond YTM − Interpolated Swap Rate(maturity). Example: A 5-year corporate bond yields 5.80%. The interpolated swap rate at 5 years is 4.60%. I-Spread = 120 bp. I-Spread is widely used by credit traders because the swap curve is smoother and more liquid than the government curve. CFA L2 covers I-Spread alongside G-Spread and Z-Spread as the three key spread measures.