can someone exlplain why the yield for an on the run treasury security is used in the den. of this ratio if its presented? Schweser just states High yield/low yield? Is it because thats a “reference rate”? So I’m assuming if this wasn’t given, you would just use High yield and low ield for yield spread, relative yield spread and yield ratio?
In the CFA text, the denominator is the reference rate, which was always a treasury security in their examples. Because of this, I imagine any question on the exam regarding the ratio will have a Treasury security as one of the two securities.