Charts of the Week
U.S. High Yield Bond Spread
Chart of the Week for March 10, 2017 - March 16, 2017
One risk measure that investors monitor is the relationship of the yield of a particular class of securities to a particular Treasury security, also know as the "spread." Larger spreads may indicate a risk-off or risk-averse market. Smaller spreads may indicate a risk-on or risk-seeking market. The chart above shows the spread between the Barclays Capital High Yield Index and a generic index of U.S. Government 10-year securities for the past 12 months.
The high yield spread has narrowed considerably from a high of 6.44% in March 2016 to a low of 3.16% in February 2017. The U.S. Presidential election in November has been one factor. Investors sold government securities causing their yields to rise, and bought high yield securities causing their yields to fall. Discussions of possible changes in tax rates and other economic stimulus activities have impacted the risk tolerance of investors away from the government fixed income sector. Another factor impacting high yield securities has been the rebound in energy prices as energy producers issue many high yield bonds and those securities have seen higher prices and lower yields.
Posted by: sarah_oz@yahoo.com
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