Hi All
It is my understanding that bank loans are usually priced over LIBOR and corporate bond spreads are calculated based on the relevant government bond rate. Why is this? It is my understanding the government bond rate (certainly for the US, UK, Germany etc.) is the "risk free" rate but LIBOR is not precisely the risk free rate as it considers the risk of the banking system. Would it be valid to compare the credit margins/credit spreads of loans and bonds given the base rates are different?
Many thanks
Adipisci iure commodi voluptas maxime blanditiis est. Itaque id quas et. Qui est omnis consequatur eaque maiores aut qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...