Interpreting I-Spreads and G-Spreads for Corporate Bonds

Summary

The document distinguishes two corporate bond spread measures by the benchmark curves used to calculate them. A G-spread compares a bond’s yield with a government Treasury curve, while an I-spread compares it with a swap curve. The question asks what extra information the swap benchmark provides and why investors might use it for corporate bonds.

The answer gives a concise practical interpretation: the G-spread indicates return relative to a risk-free government rate, whereas the I-spread indicates return relative to bank funding costs on a rolling basis. This frames the swap curve as a funding-oriented reference rather than a government-rate reference. The exchange provides no calculation example, market evidence, or discussion of how curve construction, credit risk, liquidity, or conventions affect interpretation, so the distinction should be treated as a basic intuition rather than a complete bond valuation framework.

Key ideas

• A G-spread measures a bond yield relative to a government Treasury curve.
• An I-spread measures a bond yield relative to a swap curve.
• The swap benchmark can help compare a bond’s return with rolling bank funding costs.
• Neither spread alone explains all effects of credit risk, liquidity, and curve conventions.

Tags

# I-Spread vs G-Spread


# I-Spread vs G-Spread












I am trying to build some intuition what information does I-spread provide? G-Spread and I-Spread differ as to what curve they use to evaluate the spread to. In the former it is Treasury curve and in the latter it is swap curve. I understand how the swap curve built and it represents the spot curve for swap rates of different maturities but what information it carries? Whey would one need I-spread when looking at corp bonds?

## Answer by AlRacoon (score 3, accepted)

https://quant.stackexchange.com/a/78755

G spread gives one an indication of how much return relative to the risk free rate.

I spread gives one an indication of how much return relative to where banks can fund the position on a rolling basis.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.