Credit Spreads Little Changed

The Bull case on the Treasury bailout is that this would relieve the credit crunch. However, the improvement in credit spreads thus far has been mostly limited to the mortgage market. Preferred shares were broadly lower making yields higher. The Wall Street Journal reports that corporate spreads did not fair much better.

"junk-bond spreads remained at their widest levels of the year, at 8.55 percentage points above Treasury bonds, while investment-grade corporate bond spreads rose by 0.01 percentage point to their highs at 3.22 percentage points above Treasury bonds, as concerns about the weak economy linger"

In addition, yields were pretty steady on government bonds signaling that bond investors do not believe that this plan will do much to stimulate the economy. The bond market is more reliable as a barometer of the economy than the stock market.

1 comment:

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