Treasury yields throw investors a curveball

The flattening of the Treasury yield curve is normally accompanied by a steepening of the credit curve, which compensates investors for lost spread. But in the current cycle, the credit curve is not behaving as predicted. Richard Bravo reports

Corporate bond investors have been on the edge of their seats for quite some time now, cognizant of the fact that yield margins are as close as ever to historically tight levels—Moody’s Investors Service places average Baa spreads at 154 basis points over Treasuries, a stone’s throw from the 117bp achieved in 1997. Avoiding credit-related meltdowns or sudden widening pressure has usurped any thoughts of swinging for the fences and one of the major focal points of investor concerns has been the