Z-spread

What is Z-spread?

Z-spread meaning Fixed number of basis points that would be added to the gilt yield curve at all durations so that the present value of a bond’s future payments equals its market price. Z-spread is a measure of a bond’s credit risk. Therefore, it will be zero for gilts and high for low quality corporate debt. (See also nominal spread, option-adjusted spread.)

 

reference: mercer.com