Want safety? Some top-tier U.S. corporate debt trumps Treasuries
Investors are increasingly turning away from U.S. Treasuries in favor of corporate debt from top-tier companies. This shift is driven by rising inflation and concerns over public finances, leading to tighter spreads between corporate and Treasury yields. As corporate balance sheets remain strong, particularly among tech giants, the investment case for corporate bonds appears more attractive.
- ▪The yield on the 2-year Treasury note has risen above 4.00 percent due to inflation pressures.
- ▪Corporate debt from companies like Apple and Microsoft has performed well, with yields nearing those of Treasuries.
- ▪The U.S. federal debt is around 100 percent of GDP, while corporate giants continue to report solid revenues.
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ShareSave for laterPlease log in to bookmark this story.Log InCreate Free AccountThe list of reasons not to own U.S. Treasuries is lengthening. In turn, investors are increasingly eschewing the world’s “safest” and most liquid asset and instead flocking to the debt of some top-tier U.S. companiesThis isn’t a new phenomenon, but it is attracting renewed attention as sentiment towards Treasuries sours in the face of rising inflation, deteriorating public finances, and growing doubts that policymakers have the heart to tackle either.The yield on the 2-year Treasury note has risen 60 basis points this year above 4.00 per cent, largely due to the spike in inflation from the Iran war-driven energy shock that is now expected to force the Federal Reserve to hike interest rates.
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