DEFINITION of 'Nominal Yield Spread'

The spread, expressed in percent or basis points, that when added to the yield at one point on the Treasury yield curve equals the discount factor that will make a security's cash flows equal to its current market price.

BREAKING DOWN 'Nominal Yield Spread'

Nominal yield spreads are a convention frequently used in pricing certain types of mortgage-backed securities (MBS). These MBSs are priced at a spread over the interpolated Treasury curve at the point equal to their weighted average life.

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