You know there’s been a lot of movement in the bond market recently. Savers are demanding higher yields to get comfortable acting as lenders to the government and to businesses. But now they are expecting a bit more from investment-grade businesses in the way of a premium over Treasuries.
Since the beginning of May, the spread (the difference) between BBB-rated (investment grade) bonds and Treasuries has been fewer than 100 basis points, or less than 1 percentage point. In the last few days, though, the spread has widened from as low as 94 basis points on September 18 to 106 basis points at yesterday’s close. You can see the surge on my chart below.
Bloomberg’s Katherine Doherty and Tasos Vossos report:
Credit has held up well in the past year even when sovereign debt was slumping, prompting many investors to take the view that some companies are safer bets than even the most powerful governments. But record bond sales recently from Paramount Skydance Corp. to SoftBank Group Corp. have added to a surge in supply of corporate debt that’s now giving money managers pause.
Action Line: In other words, supply of new debt is greater than demand at the lower rates. But if you’re an investor, bonds are finally paying rates you can sink your teeth into. When you want to talk about bonds in your portfolio, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
