Yield spread and spread to mid-swap is a difference between yields on bonds in question and yield on a corresponding base asset (or benchmark) denominated in the same currency and having similar duration; usually the benchmark is government bonds of the country which currency the instrument is denominated in. A spread to mid-swaps
(mean values of interest rate swaps
) is also calculated. Spreads are calculated to compare investment appeal of different fixed income assets. The key advantage of using IRS
or mean mid-swap rates
as a benchmark is the fact that they have one reference rate, i.e. calculating a spread to corresponding swaps gives you an opportunity to compare bonds denominated in different currencies.