A question in this case study references: “Dealers often will quote me a spread to Treasuries whose maturity does not match the bond’s maturity”
Q: The spread measure that dealers often quote is most likely the:
A. I-spread B. G-spread C. benchmark spread
Can someone explain why the answer is C: benchmark spread?
I thought the G-spread uses a spread over an actual or interpolated government bonds (in this case because of the maturity mismatch, isn’t it indicating a need for interpolation?). Thank you!
This question caught me out if I recall correctly as well. My rule of thumb from reading the answer is that anything referring to a swap curve uses the I spread, anything talking about interpolating or approximating a yield to match the bond maturity is a G spread and anything that refers to a specific treasury which doesn’t match the maturity of the corporate bond is a benchmark spread.