The premium (or excess return) that the holder of a fixed-income security (a bond) earns, net of default losses, over comparable risk-free (Treasury) securities. Buy-and-hold investors will earn the spread premium at maturity (or at the time of default). Prior to maturity, the security’s mark-to-market will reflect such a premium or excess return.

According to asset pricing theory, the credit spread of a debt security bears a systematic risk premium in excess of its expected default losses.