Narrow Spread Between Corporate and Treasuries Signals Risk Appetite

Corporate bonds are in high demand. Investors are practically trampling one another to buy them. One measure of the appetite for these bonds is the “spread,” or difference in bond yields between corporate bonds (often seen as somewhat risky) and 10-year Treasury notes (one of the safest investments).

The spread has narrowed to rates not seen since July 2007 — before the financial crisis — according to Bank of America Merrill Lynch.
It’s a sign that companies are borrowing a lot of money, and that investors don’t view corporate debt as particularly risky right now. The spread is 125 basis points. That means investors only want an extra 1.25% when they buy corporate debt versus plain vanilla U.S. government debt.
Companies are taking advantage of this.

via CNN

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza