How spread changes move bond prices

In short

• For an option-free bond, the same modified duration and convexity apply whether the yield change comes from the benchmark or from the spread.
• Small change: $\%\Delta PV^{\text{Full}} \approx -\text{AnnModDur} \times \Delta\text{Spread}$.
• Large change: add $+\tfrac{1}{2} \times \text{AnnConvexity} \times (\Delta\text{Spread})^2$. Rescale convexity so it is of the order of duration squared, and enter the spread change as a decimal.
• Narrower spreads raise prices and returns; wider spreads lower them. Longer-duration bonds have higher spread sensitivity.
• The approximation error grows with duration and with the size of the spread change.