Consistent with a leveling of the rate of increase in the US trade deficit in 2006, the price of investment grade corporate bonds has been holding steady, as the graph indicates.

Driven by a trade deficit that has been increasing since the early 1980s, the persistent flow of funds into the US bond market has caused bond yields to fall. (See: “Trade deficits have depressed bond yields for 20 years.”)

The graph suggests that from a long-term perspective, corporate bond yields in recent months have been flattening out to match the reduction in growth of the trade deficit, rather than moving along with Federal Reserve short-term interest rates.

	Long Down Trend in AAA Corporate Bond Yields

This entry was posted on Thursday, September 7th, 2006 at 2:29 pm and is filed under Corporate Bonds, Foreign Investors. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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