the shorter the maturity, the less the z-spread will differ from the nominal spread the steeper the yield curve, the greater the difference. this is lv1 stuff, but i can not recall why is that and still do not get it after searching the forum. is this because of reinvestment risk?
Because nominal spread is calculated assuming one discount rate for YTM, using the maturity of the bond in question. If you think about it, each coupon + the prinicipal would be discounted at the same rate, hence a flat yield curve. z-spread takes into account the spot rate curve change (each coupon payment has a different discount rate), deviating from that flat yield curve assumption.