When you consider the compression of BBB bond spreads, understand the risks implied now that Mom and Pop are being targeted by private credit salesmen. The spread is the additional interest investors receive above the risk-free rate (Treasuries). When the riskiest investment-grade bonds, BBB rated issues, are trading with very narrow spreads, investors are relying on everything going right for corporations.
Action Line: Your Survival Guy is a big proponent of balanced portfolios with bonds included, but investors must understand the risks they are facing. When you want to talk about risk in your portfolio, and your own tolerance for it, email me at ejsmith@yoursurvivalguy.com.
