Yield Curve Spreads - Treasury Yield vs. Corporates

Corporate bonds trade at spreads above the corresponding treasury security of the same maturity range on the curve. Basis point spreads are how they trade. Since corporate bonds have more credit risk than treasury notes and bonds, they will sell at higher yields.

When interest rates are very low, or when the yield curve is flat or inverted, these spreads on corporates can thin. This is mostly true with the higher credit quality of corporate bonds rated A or better.

If a 10 year treasury is at 2.5%, a corporate bond may be at 2.85% of a high quality. Lower grade bonds or junk bonds will have higher spreads as their credit quality is less.

Attractive spreads over treasuries is what professional or seasoned traders look for. As interest rate environments change, these levels will adjust. This market is changing every minute.

Recommended Reading:

Corporate Bonds: Structure and Analysis

Managing a Corporate Bond Portfolio