How can we interpret credit spreads?

The key questions for investors are why and how should current credit spread levels be interpreted? Yields and credit spreads revisited Firstly, let us recall the two components that make up the corporate bond yield. The benchmark for all other bonds are those issued by the highest-quality governments, which are assumed to carry the least risk. Naturally, when investors buy bonds issued by anyone else, they demand higher returns in the form of the yield to maturity.  The difference between the higher yield on a corporate bond and the yield on a similar maturity government bond is...