Investment Grade Corporate Bonds Hold Steady: Q2 2006
Posted By John Schroy On 7th September 2006 @ 14:29 In Corporate Bonds, Foreign Investors | 1 Comment
Consistent with [1] 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: “[2] 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
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[1] a leveling of the rate of increase in the US trade deficit in 2006: http://capital-flow-analysis.com/capital-flow-watch/us-trade-deficit-increase-levels-off-in-2006.htm
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[2] Trade deficits have depressed bond yields for 20 years: http://capital-flow-analysis.com/capital-flow-watch/trade-deficits-have-depressed-bond-yields-for-20
-years.html
[3] bond market: http://capital-flow-analysis.com/capital-flow-watch/index.php?tag=bond-market
[4] corporate bonds: http://capital-flow-analysis.com/capital-flow-watch/index.php?tag=corporate-bonds
[5] foreign investors: http://capital-flow-analysis.com/capital-flow-watch/index.php?tag=foreign-investors
[6] interest rates: http://capital-flow-analysis.com/capital-flow-watch/index.php?tag=interest-rates
[7] trade deficit: http://capital-flow-analysis.com/capital-flow-watch/index.php?tag=trade-deficit
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