January Bond Strength Reverses As Spreads Explode On Credit Concerns


Corporate borrowing costs are suddenly surging at the fastest rate in two months.

While fixed income has done well early this year, this trend could be bad news for bond investors if it continues:

Bloomberg: The extra yield investors demand to own corporate bonds instead of government securities widened 4 basis points last week to 169 basis points, the most since the period ended Nov. 27, according to the Bank of America Merrill Lynch Global Broad Market Corporate Index. Spreads widened for three weeks, the longest stretch in about a year, while those for U.S. high- yield, high-risk companies expanded by the most since August.

Credit-default swaps on the Markit CDX North America Investment-Grade Index, linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, traded at the highest in more than two months, increasing 9.5 basis points over two days to 101.75 basis points as of Feb. 5, according to broker Phoenix Partners Group.

Read more here >

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.