Can someone pls confirm my understanding?
So the coupon payment of a floater= Libor + Spread
While the coupon payment is reset at every payment date, the spread component of a floater doesn’t change throughout the maturity of a floater which is why the spread duration has a higher impact on the overall price of a bond than the modified duration?
The spread in spread duration is not the spread in the calculation of the coupon payment.
The former changes when investors demand a higher or lower return on their investment; the latter is constant.
Spread duration is higher than modified duration because a credit spread change doesn’t change the coupon rate, so it has a greater effect on the price than a change in the benchmark rate (which does change the coupon rate).