Corporat Bonds: Tight

July 31st, 2009 9:22 am | by John Jansen |

Corporate bond spreads are opening about a nickel tighter.

Here are a couple of examples of how tight spreads are.

Five year Walmart paper is quoted 30/20 this morning.

Ten year Walmart paper is 65/55.

Microsoft 5 year paper is 30/25.

Microsoft 10 year paper is 55/50.

To give those numbers some perspective, one need only look to 5 year FNMA and Freddie Mac paper which is trading around 26 basis points.

Which means that WMT and MSFT paper trades essentially on top of paper which has a bear hug of the US government.

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  1. 3 Responses to “Corporat Bonds: Tight”

  2. By David Merkel on Jul 31, 2009 | Reply

    Time to start trading yield for capital preservation. Risks in the financial markets are not played out yet.

  3. By Tyler K on Jul 31, 2009 | Reply

    LQD just past 4. Much, much quicker then I anticipated. As I mentioned last Fri, it is my personal view that there isn’t much more upside there than that level. I’ll likely abstain from any venture over the weekend, but anticipate that I’ll take a modest position on the short side sometime early next week.

  4. By Gary on Jul 31, 2009 | Reply

    David Merkel — agree generally with your sentiments, but curious on how you weigh risk of inflation (or lets call it rising cost of living) in Treasuries versus credit risk in corporates…

    Actual cost of living is rising faster than 30yr Treasury yields (never mind shorter maturities), corporates barely keep up. That isn’t really a “risk”, its a guaranteed loss.

    IG corporates face a credit risk (probable system wide, but maybe not for all names).

    Seems like a possible credit loss on a basket of IG corporates is a lower risk than a guaranteed loss of purchasing power in Treasuries?

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