Module III· DCM — Investment Grade & Senior DebtAdvanced
Question

How do you analyze a bond's credit spread: which components must you consider?

Answer

Analyze issuer credit quality, leverage, cash flow, ratings, sector risk, maturity, seniority, security, covenants, liquidity, currency, benchmark curve, market technicals, new issue premium, and relative value versus peers and the issuer's curve. Spread is not just default risk; it also reflects liquidity and supply / demand.