| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Spreads widen as corp bonds lag Treasuries in low-rate race |
REUTERS - August 24, 2011 - By Timothy Sifert
NEW YORK, Aug 24 (IFR) - While corporate bond coupons have been shrinking fast, they haven't been able to keep pace with the precipitous decline of Treasury rates.
As a result, the difference between corporate and Treasury yields -- a key measure of high-grade bond investment risk -- is wider than it has been all year. Yet corporate bonds, with the exception of banks, aren't that much riskier.
Witness the option adjusted spread (OAS) between Treasuries and corporate bonds in the Barclays investment grade corporate index: closing at 2.12 percent on Tuesday, it is wider than it has been in more than a year and a half (see chart). Last Friday it breached the 2 percent mark for the first time since December 3 2009, when it closed at 2.03 percent.
Yesterday's close was about 76 billion pounds wider than this year's low of 1.36 percent. Reached on April 11, the low close came on a day when Wal-Mart Stores (WMT.N) took home $5 billion in a four-part trade, including low coupon records, and the 10-year Treasury note finished with a 3.59 percent yield.
Yesterday, the benchmark note closed at 2.15 percent, tighter than April by a whopping 144 billion pounds.
All of this means that though corporate bond yields have been falling fast, they have not caught up to Treasury yields, which have been changing hands near record lows. Industrial corporations in general are not underperforming, however. Quite the contrary: conservative business strategies since the credit crisis and record amounts of balance sheet cash has made them prime targets for debt investors.
"Despite increased risk aversion and broader economic weakness, credit fundamentals look pretty strong," said Shobhit Gupta, credit strategist at Barclays Capital.
The main offender pushing the Barclays index wider is the financial sector, which comprises about 35 percent of the constituent securities. Usually more volatile than the overall index -- especially during the credit crisis -- financials finished Tuesday with a 2.93 percent OAS. The spread is subdivided into 2.87 percent for intermediate maturity financial bonds and the widest subsector in the financial index, 3.23 percent for long-dated securities.
"The move is extreme for banks," an analyst said. "They have widened more than 100 billion pounds since the beginning of July."
Over the same period the entire corporate index, including financials, widened about 55 billion pounds. Industrial credits, including big consumer borrowers like Coke (KO.N) and Pepsi (PEP.N), but excluding utilities and banks, gapped out only about 35 billion pounds in the period.
WIDENING GAP
Since the credit crisis, the financial space has been the most volatile and had a wider spread than the index as a whole. What's more, the difference between financials and the entire index is growing. On April 11, when the corporate index had its low close this year of 1.36 percent, the financial component finished the day at 1.61 percent, for a 25 billion pound spread differential. However, yesterday, the difference between spreads was 81 billion pounds.
For the complete article.
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