The spread (the basis points)between the yields on AAA-rated bonds and B-rated bonds tends to rise when yields increase.

Question

Quizplus · Accepted Answer

The spread between AAA-rated bonds and B-rated bonds typically widens when yields increase because B-rated bonds are considered riskier than AAA-rated bonds. In times of rising yields, investors demand a higher premium for taking on the additional risk associated with lower-rated bonds, thus widening the spread.

The Spread (The Basis Points)between the Yields on AAA-Rated Bonds