An active manager observes a yield spread for an outstanding corporate bond that is above the G-spread
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An active manager observes a yield spread for an outstanding corporate bond that is above the G-spread for that same bond. Which of the following is the most likely explanation for the difference?
A. The government benchmark bond used to calculate the yield spread has a shorter maturity than the corporate bond, and the benchmark yield curve is upward sloping.
B. The government benchmark bond used to calculate the yield spread has a shorter maturity than the corporate bond, and the benchmark curve is downward sloping.
C. The government benchmark bond used to calculate the yield spread has a longer maturity than the corporate bond, and the benchmark yield curve is downward sloping.
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