Spread

Definition

In financial markets, the spread refers to the difference between the bid price (what buyers are willing to pay) and the ask price (what sellers are willing to accept). The spread represents a transaction cost for traders and a source of revenue for market makers and brokers. In forex, spreads are measured in pips — major pairs like EUR/USD typically have spreads of 0.5-2 pips, while exotic pairs can have spreads of 10+ pips. Tighter spreads indicate higher liquidity. In bond markets, the spread can also refer to the yield difference between two bonds (e.g., corporate bond spread over Treasury yields).