I came across a question on a practice exam where they calculated the the Ratio spread of a Tax free municiple vs a treasury with the tax adjusted Muni spread in the numerator and the T bill in the denominator which resulted in the lower yield/higher yeild. Yet in ol Schweser it says the relative spread is the (higher yield/lower yield)-1 and that the ratio spread is just higher/lower. The only thing I can think of is that prior to adjusting the muni for tax considerations the yield was in fact higher than the T bill and so you would use the then tax adjusted and consequently lower yield in the numerator only which would be in line with what Schweser was saying. Or if anyone knows in fact if One or the other is just wrong ie the Ratio Spread is not the Higher/lower yield but vice versa or if in fact this muni circumstance is a rare exception due to the tax benefite adjustment.

I think it’s probably just a rare exception. Typically, the Treasury rate will always be the lower, so it was easier for Schweser to say “Higher/Lower”. I would go in with the assumption that lower always equals Treasury rate.

That is more or less what I thought too, thanks.