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Profiting From The Spreads With Investment Grade And High Yield Bond ETFs
Seeking Alpha - Jan. 24, 2012 - By Lawrence - Weinman
A key tool in positioning bond strategies is to watch the spreads, in this case credit spreads. That would be the differential between what are considered riskier bonds (investment grade and high yield bonds) to Treasuries considered free of credit risk (although no longer unanimously).
As can be seen from the graph below the interest rate spreads (differentials) can vary quite a bit. But there is a strong reversion to the mean. Looking at the graph below showing the spread between investment grade corporate bonds and Treasuries, I would put that mean value at around 1,5% to 1.7%.
Income Security Recommendation February 2012 Issue.
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