WSJ: “Narrow Bond Spreads Signal Market Confidence in Profit Margins, DataTrek Says”By datatrekresearch in IN THE NEWS
Excerpt from The Wall Street Journal quoting DataTrek Research:
..."Corporate bond spreads lower than those seen during past periods of economic stress reflect investors’ confidence in the resilience of companies’ profit margins—even during a recession, DataTrek analysts wrote.
Corporate bonds tend to offer higher yields than ultrasafe Treasurys. That spread compensates investors for the increased risk and signifies investors' confidence in future earnings and cash flows.
That spread is contracting, according to DataTrek, an indication that investors are more confident that cash flows will be sufficient to pay them their coupons and principal in a timely fashion. If they were widening, the note said, that would suggest investors are increasingly worried about an upcoming recession"...
Full article here on the WSJ.