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Credit Spread Calculator

Work out credit spread instantly with clear inputs, formula shown and shareable results.

About Credit Spread Calculator

The credit spread is the extra yield a corporate bond pays over a government bond of similar maturity. Dividing the spread by loss given default gives the annual default rate at which that extra yield is exactly consumed — the break-even for taking the credit risk.

Formula

Spread and break-even

Spread = corporate yield - government yield; break-even PD = spread / (1 - recovery)

Worked example

With the default values below, Credit Spread Calculator returns Credit Spread In Basis Points of 150.0. Change any input above and every figure here is recalculated in your browser.

Inputs used

Corporate Bond Yieldaccepts 0–100 %
8.6 %
Government Bond Yieldaccepts 0–100 %
7.1 %
Amount Investedminimum 0
1,000,000
Assumed Recovery Rateaccepts 0–100 %
40 %

Results

Credit Spread In Basis Points
150.0
Extra Income Per Year
$15,000.00
Break-Even Annual Default Rate
2.500%
Spread As Share Of Total Yield
17.44%

Step by step

  1. 1Values used
  2. 2Spread and break-even
  3. 3Credit Spread In Basis Points= 150.0
  4. 4Extra Income Per Year= 15,000.00
  5. 5Break-Even Annual Default Rate= 2.500
  6. 6Spread As Share Of Total Yield= 17.44

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.

Frequently Asked Questions

Is the whole spread compensation for default?

No. Part pays for illiquidity and for the risk that spreads widen, so the break-even default rate overstates expected losses.

Why do spreads widen in stress?

Investors demand more compensation exactly when default risk rises and liquidity dries up, so prices fall on both counts.

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