When I mentioned to an English colleague that the corporate yield should be corresponding T-bond rate plus credit spread, he said No, CS+swap rate. (I’m in the US.) An academic paper I read said that though nominally quoted as treasury+CS, corporate bonds actually trade closer to swap rate+CS. Do you know what the prevailing practice is?
DarienHacker Wrote: ------------------------------------------------------- > When I mentioned to an English colleague that the > corporate yield should be corresponding T-bond > rate plus credit spread, he said No, CS+swap rate. > (I’m in the US.) > > An academic paper I read said that though > nominally quoted as treasury+CS, corporate bonds > actually trade closer to swap rate+CS. > > Do you know what the prevailing practice is? beyond US, it’s quoted as Libor+ (ie swap). however, in US it’s typically quoted as Treasury+. Coming from buy side in US, I would say it depends on what you are borrowing at (Libor or Fed Funds)… but you would never be wrong with Libor+ (easier to compare vs CDS)
I’m at a big buy side fixed income shop, we trade credit off swaps.