A yield spread is a difference in yields across debt instruments with different maturities, credit ratings, issuers, or risk levels, determined by subtracting one instrument’s yield from the other. Basis points (bps) or percentage points are the most used units of measurement for this discrepancy.
The credit spread is how yield spreads are typically expressed in terms of one yield versus that of US Treasuries. If the yield on a five-year Treasury bond is 5% and the yield on a 30-year Treasury bond is 6%, the yield spread between the two debt instruments is 1%. If the 30-year bond is trading at 6%, the five-year bond should be trading at around 1%, making it very attractive at its current yield of 5%.