A yield curve can be constructed using similar risk corporate bonds. The yield curves constructed with corporate bonds will be The distance between the U.S. Treasury yield curve and the corporate bond yield curve represents the default risk premium since U.S. Treasuries are considered risk free. This default risk premium is also known as the default spread.
Step-by-step explanation:
A yield curve is a graphical representation of a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates.
The slope of the yield curve gives an idea of future interest rate changes and economic activity.
A yield curve can be constructed using similar risk corporate bonds. The yield curves constructed with corporate bonds will be The distance between the U.S. Treasury yield curve and the corporate bond yield curve represents the default risk premium since U.S. Treasuries are considered risk free. This default risk premium is also known as the default spread.