A Pragmatist’s Guide to Leveraged Finance: Credit Analysis for Bonds and Bank Debt

8. A Primer on Prices, Yields, and Spreads

What’s in this chapter:

• How prices are used in high-yield debt

• How yields and spreads are used

• Differences between typical bank loan coupons and bond coupons

• When and how duration and total return are used

• The concept of prices and yields in deferred pay bonds

This chapter covers how prices, yields, and spreads are used in the leveraged finance market. Prices, trades, and value are often discussed in the market using these terms, especially when relative value between two or more investments is being discussed. However, yields and spreads are also measures of expected absolute and relative returns on these debt instruments.

The Basics

When someone wants to know the “price” at which to buy or ...