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Bond sector/Treasury/Issuer-specific benchmarks
On the question below, can't you argue that since Bond sector benchmark and treasury security reflect credit risk and liquidity risk but issuer specific benchmark reflects only liquidity risk, that the spread between issuer specific and the bond yield would be the greatest? Or are we to assume that the yield on a treasury security will still be lower even though it incorporates credit risk (since it's the risk free rate)? Thanks guys!
Which of the following benchmarks would generate the greatest spread when used to examine a bond yield?
A) Bond sector benchmark.
B) A U.S. Treasury security.
C) The issuer of a specific company.
Your answer: C was incorrect. The correct answer was B) A U.S. Treasury security.
The U.S. Treasury security would generate the highest spread because the yield on Treasury securities will be the lowest as they have the lowest credit and liquidity risk. The yields on a bond sector benchmark and for a specific company will be higher. |
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发表于 2011-7-11 19:29
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