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Spread

A spread is the difference between two rates.

For example, the spread between a competitive 5-year fixed and the 5-year government bond yield has averaged 150 bps long term. When it's much more than that, it implies that 5-year fixed rates will fall, and vice versa.

The term "spread" is often used to describe the gross profit margin on a mortgage, or the difference between the borrower's rate and the lender's base cost of funds.

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