I am currently reading two policy papers that construct, for a fixed-income bond, a following credit spread:

  • This one, p. 12, computes the yield to maturity minus the Overnight Index Swap (OIS) rate of a similar duration (let's assume that the underlying Interest Rate of the OIS is EONIA)
  • This one (paywalled), p. 125, subtracts "from the effective yield the German bund zero coupon interest rate of a similar duration"

It is unclear to me what the authors did precisely in terms of the subtrahend, no further explanations are given.

For the second measure, would I have to bootstrap the zero curve and take the n-year spot rate where n equals the duration of the bond? However, duration is not the same as maturity.

For the first measure, OIS are bilateral agreements where the floating rate is based on the EONIA, under the above assumption. Would I have to select the rate of the agreement that has a duration which matches the one of the bond?

Thank you for your help!


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