High-Yield Bond Spread

Spread is just another affirmation of risk.

That is, when you have a high spread, you have high relative risk.

Relative to what or whom?

Not crazy risky Uncle Larry, who bets the ponies. Rather, the spread is relative to a similar duration U.S. Government bond. So like, if you have 5-year T-Notes that yield 3.25%, and some high-yield bond that comes due in 5 years-ish is carrying a spread of 430 basis points, then those high yield bonds are yielding the 755 (325 plus 430) basis points of 7.55%.

Big spread. Big yield. Big butts. We cannot lie.