Bond Yield Spreads

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Interpretation

The charts above display the yield spreads between Corporate Bonds, Treasury Bonds, and Mortgages. All bonds in this comparison have long maturity dates. Therefore, the main differentiator is the underlying credit risk, rather than the duration, which is examined on the Yield Curve page. The spreads tend to widen in economic recessions and indicate an increased risk of default as well as reduced liquidity in the market.

Further information

Yields for Corporate Bonds, Treasury Bonds and Mortgages

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Interpretation

The chart above gives a different view of the same data from the spreads above.
The 30-Year Fixed Rate Mortgage Rate is the average rate based on mortgages with a 30 year duration in the United States. The data since 1971 is provided by Freddie Mac.
The Baa Corporate Bond Yield series is based on Baa rated bonds with maturities 20 years and above. Baa rated bonds and higher (according to Moody's credit rating) are considered "investment grade".
The Aaa Corporate Bond Yield series is based on Aaa rated bonds with maturities 20 years and above. Aaa is the highest credit rating issued by Moody's.
The 10-Year US Treasury Constant Maturity Rate is the interest that the US Government pays when it issues a Treasury Bond with a duration of 10 years. Debt issued by the US Government is generally considered to be free of credit risk, as the probability of default is almost non-existent. The spreads between Treasury Bonds with different durations are examined on the Yield Curve page.

Data Sources



Special thanks to Steven Sabol, creator of Capital Markets Data, for generously providing the data that led to the development of this page.


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