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What does it mean when a company’s corporate spread tightens?
A. The benchmark yield is outperforming the company’s bonds.
B. The company’s borrowing cost increases.
C. The company’s borrowing capacity will become more restrictive.
D. The company’s bonds are outperforming the benchmark yield.
♦ Relevant knowledgeBenchmarking is the process that measures the effectiveness of a business’s products, services, or procedures against that of a business thought to be the most effective in the field, or “best within its field.”
The company’s corporate spread tightens when the company’s bonds are performing better than the benchmark yield.
Thus, option D (The company’s bonds are outperforming the benchmark yield) is correct.