Andrew J. Kalotay and Michael P. Dorigan

Yield curves are fundamental to the understanding of bond values. In the taxable market, the standard benchmark is the Treasury curve, which indicates the levels at which the U.S. government can borrow for different maturities.  The yield curves of other issuers are quoted as spreads to the Treasury benchmark.  From these, it is a simple matter to calculate discount rates appropriate for valuing such issuers’ bonds.