Why Bonds from One Issuer Can Have Different Z-Spreads

Summary

This exchange considers why two bonds from the same company can show sharply different Z-spreads, challenging the idea that the measure isolates issuer credit risk and should therefore be similar across the issuer’s debt. It illustrates the issue with two Altice France bonds whose reported spreads differ substantially.

The response recommends comparing time to maturity and bond covenants. A shorter remaining term may be associated with a lower Z-spread outside special circumstances, while differences in ranking or security can lead to different credit exposure. The exchange raises the possibility of modeling spreads across maturities, but does not evaluate a bootstrapped term structure or provide supporting market data. Its guidance is therefore a set of diagnostic factors rather than a complete explanation or a validated spread model.

Key ideas

• A single issuer’s bonds can have materially different Z-spreads.
• Time to maturity is one factor to examine when comparing bond spreads.
• Differences in security and payment priority can affect the credit risk priced into each bond.
• A maturity-based spread curve is suggested as a question, but the exchange does not test that approach.

Tags

# different Z-spreads for a same company


# different Z-spreads for a same company












A same company has two different bonds. I expected the Z-spread to be close for both bonds (since my representation of the Z-spread is the spread due to credit-risk proper to the company).

Here is an example:

Altice France SA/France => 95.282 Z-spread for a bond.

Altice France SA/France => 473.470 Z-spread for an other bond.

Looking at a whole set of data, I observe that it is not rare to have significative different spreads.

Should I conclude that the Z-spread model has a bond-dependancy ?

Shouldn't I conclude that a better model could be a time-dependant spread (I could build it via bootstraping using increasing maturities of a set of bonds of a same company ?).

Thanks a lot for your feedbacks !

## Answer by olemm (score 2, accepted)

https://quant.stackexchange.com/a/40932

you should look at time to maturity (TTM) and covenants for the bonds. TTM : expect lower z-spread as bond go to maturity if it's not a special situation covenants: are the bonds pari passu, or do they have different security ?

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