Credit spreads compare how much an investor could make on a Treasury security (government) versus some other debt security that’s not issued by the government.
Since the government doesn’t back the other securities, they are obviously a bit riskier (because there's a better chance they'll default, i.e. you won’t get paid) and have higher interest rates to make up for the risk.
Yeah...it's the whole "greater the risk, greater the reward" shtick.
Related or Semi-related Video
Finance: What is the Equal Credit Opport...6 Views
Finance a la shmoop what is the Equal Credit Opportunity Act? alright people while the
federal government thinks everyone should have the equal opportunity to get [Men in Federal Government appear]
into debt isn't that sweet of them you know that Uncle Sam well he sure does
have a heart of gold this federal law makes it illegal to discriminate against
people who are applying for financing on pretty much anything legal based on
their age gender marital status religious affiliation ethnic or national
background or public assistance benefits your credit score however well that
still matters sorry just keeping it real
Up Next
What is a line of credit? A line of credit is kind of like a loan. A bank gives a borrower a line of credit, which basically says they can borrow â...
What is the Credit Rating Agency Reform Act Of 2006? As signed by President George W. Bush in 2006, the Credit Rating Agency Reform Act required th...
What are Credit Scores and Worthiness? One of the most ubiquitous ways that digital society now dictates our lives is with business and personal cr...