Bonds: G spread vs benchmark spread
So I get that the benchmark spread of a bond is the spread to the benchmark treasury, which might have a different maturity than the bond in question, and that the g-spread is to an interpolated point on the yield curve with the same maturity.. but my confusion is with why the interpolated point matters to investors.. I get that it shows a more accurate picture of the compensation you are getting in yield over the interpolated treasury at the same maturity, but if that treasury is interpolated and not actually purchasable, then why would investors be compensated for taking on risk vs an investment (the interpolated treasury) that isn’t even investable.. shouldn’t the focus just be on the spread to the benchmark because you could actually buy that so you should be rewarded for taking more risk rather than buying the benchmark?
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