Hi All Just trying to figure out what it means when spreads widen? Does this mean corporate bonds fall in value? Or all bonds (including government bonds) fall in value? Thanks
The spread on a bond is the excess of the yield on that bond over the yield on an equivalent risk-free bond, with a government bond often being used to represent the latter. So purely a widening of the spread (with no underlying change in interest rates) would mean that the yields on corporate bonds have increased, and thus they fall in value - but no impact on the risk-free bonds.
