Mathematically, a bond spread is the simple subtraction of one bond yield from another.
Spreads reflect the relative risks of the bonds being compared.
The higher the spread, the higher the risk usually is. People referring to bond spreads are generally talking about comparing the yields on federal government bonds, generally considered a country's most creditworthy bonds, to the bonds of other issuers such as provinces, municipalities or corporations. Bond spreads can also be calculated between bonds of different maturity, interest rate coupon or even different countries and currencies. To properly understand the concepts of bond spreads, we must first examine the mechanics of how spreads are calculated. The chart below shows the yield of the Sears bond since its issue in 1989 and the Canada bond yield for the same time period.