Credit Spread Calculator

Your details

The yield to maturity (YTM) of the risky bond you are analysing, expressed as an annual percentage.
%
The yield on the risk-free benchmark (e.g. a U.S. Treasury note) with a similar maturity to the corporate bond.
%
Years until the bond matures. Both the corporate and benchmark bond should share the same maturity for an accurate comparison.
years
The percentage of face value investors historically recover in default. Senior secured debt averages around 60-70 %, unsecured around 40 %, subordinated as low as 10-20 %. Used to estimate the implied default probability.
%
The par (face) value of the bond position. Used only to translate the spread and expected loss into dollar terms; it does not affect the percentage or basis-point outputs.
USD
Credit spreadInvestment-grade (moderate)
0.015%

Yield premium above the risk-free benchmark

Credit spread (bps)150bps
Risk tierInvestment-grade (moderate)
Implied annual default probability0.03%
Expected annual loss rate0.02%
Expected annual loss (USD)1,500USD
Annual spread income1,500USD
150 bps
Investment-grade tight<100Investment-grade moderate100-300High-yield300-600Distressed600+

150 bps spread - Investment-grade (moderate)

  • The corporate bond yields 5.30 % versus the 3.80 % benchmark, a premium of 150 basis points (1.50 percentage points).
  • On a $100,000 notional that extra yield generates roughly $1,500 of additional coupon income per year.
  • At a 40 % recovery rate, the market is pricing an implied annual default probability of approximately 2.5 % and an expected annual loss rate of 1.50 %.
  • Spreads in the 100-300 bps range are typical for lower investment-grade or upper high-yield issuers with moderate but manageable default risk.

Next stepFor longer maturities, also consider duration risk: a 1-bps tightening in spread on a 10-year bond changes the price by roughly 0.1 %. Use a bond duration calculator alongside this tool.

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