Hi all,
Are the G-spreads of a corporate bond calculated with spot rates of a zero-coupon gov bond (i.e. from the spot curve), or with the YTM of a coupon-paying gov bond, i.e. from the par curve?
My understanding is that it’s the latter as the YTM of a coupon paying gov bond is more appropriate for a coupon paying corporate bond as both have exposure on reinvestment risks. Was a bit stumped by the question in the level 1 text, where the solution was to use the provided spot rate as is. Thanks in advance for the help!
