Intermarket Sector Spread


DEFINITION of 'Intermarket Sector Spread'

The difference in yields between two fixed-income securities with the same maturity, but originating from different investment sectors. Intermarket sector spreads in the bond market, for example, often occur between corporate bonds and government bonds with the same maturity. The U.S. bond market is classified in issuer-based sectors. These sectors include the U.S. government, U.S. government agency, corporate, municipal, mortgage, asset-backed securities and foreign sectors. A common example of an intermarket sector spread is the yield spread between Treasury securities and non-Treasury issues with the same maturity.

BREAKING DOWN 'Intermarket Sector Spread'

Spreads tend to narrow or tighten when the economy is growing; spreads tend to widen when the economy is slowing down, when bond interest rates drop. Other factors that can affect the intermarket sector spread include the relative credit risk of both bonds, the presence of embedded options (that add value to the issue), the liquidity of the issues, and the tax liabilities of the interest received by investors. In comparison, an intramarket sector spread is the difference in yields between two issues within a market sector, such as two corporate bonds.

  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Intermarket Spread Swap

    A swap transaction meant to capitalize on a yield discrepancy ...
  3. Bear Spread

    1. An option strategy seeking maximum profit when the price of ...
  4. Workout Period

    The period of time when temporary yield discrepancies between ...
  5. Sector

    1. An area of the economy in which businesses share the same ...
  6. Bond Swap

    Selling one debt instrument in order to use the proceeds to purchase ...
Related Articles
  1. Bonds & Fixed Income

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  2. Options & Futures

    Bond Spreads: A Leading Indicator For Forex

    Here we examine some telling patterns in the relation between countries' interest rates and their currency pairs.
  3. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  4. Investing

    The Pros and Cons of High-Yield Bonds

    Junk bonds are more volatile than investment-grade bonds but may provide significant advantages when analyzed in-depth.
  5. Financial Advisors

    Ditching High-Yield Bonds for Plain Vanilla Ones

    In a low-rate environment, it's tempting to go for higher yield bonds. However, you might be better off sticking with the plain vanilla ones.
  6. Bonds & Fixed Income

    What is an Indenture?

    An indenture is a legal and binding contract between a bond issuer and the bondholders.
  7. Bonds & Fixed Income

    Credit Default Swaps: An Introduction

    This derivative can help manage portfolio risk, but it isn't a simple vehicle.
  8. Investing

    Understanding High Yield Fund Performance

    For exchange traded fund, not all high-yield ETFs are the same. So, we take a look at one high yield investment in particular to set the stage for you.
  9. Investing

    Is US Inflation Too Low?

    One reason the Fed has delayed its first rate hike: U.S. inflation has been persistently running below the stated 2 % level the central bank seeks to target.
  10. Bonds & Fixed Income

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  1. What are the maximum Social Security disability benefits?

    The average Social Security disability benefit amount for a recipient of Social Security Disability Insurance (SSDI) in 2 ... Read Full Answer >>
  2. How do I calculate the future value of an annuity?

    When planning for retirement, it is important to have a good idea of how much income you can rely on each year. There are ... Read Full Answer >>
  3. Have hedge funds eroded market opportunities?

    Hedge funds have not eroded market opportunities for longer-term investors. Many investors incorrectly assume they cannot ... Read Full Answer >>
  4. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  5. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
  6. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center