Question: Suppose a client observes the following two benchmark spreads for two bonds: Bond issue U rated A: 150 basis points Bond issue V rated BBB:

Suppose a client observes the following two benchmark spreads for two bonds:
Bond issue U rated A: 150 basis points
Bond issue V rated BBB: 135 basis points
Your client is confused because he thought the lower-rated bond (bond V) should offer a higher benchmark spread than the higher-rated bond (bond U). Explain why the benchmark spread may be lower for bond U.

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