Corporate Bond Yields Still Lower

Even junk issuers get a break.
Ed ZwirnJuly 20, 2001

Continuing a movement which began the prior week, most corporate bond yields fell during the week ending July 19 while tracking Treasurys.

But, reversing a recent trend, the very lowest-rated corporate bond issuers saw their yields drop the most.

According to index figures supplied by Merrill Lynch to (see chart below), single-C-rated yields ended the period at 25.607 percent, or more than 21 basis points lower than the prior week.

Investors for bond in that category, however, still continue to demand a much higher return than the 20.864 percent prevailing on July 19, 2000.

In addition, there was good news for issuers and holders of most other corporate bonds.

Triple-A yields dropped by more than 13 basis points, as did the return on double-A-rated paper. Single-A dropped by nearly 14 basis points; triple-B, over 12 basis points; and double-B, more than 11 basis points.

Only single-B-rated bonds continued to show weakness, with yields up more than 12 basis points on the week.

In the meantime, most issues stayed relatively steady in relation to benchmark Treasurys during the week, with spreads for every rung on the credit ladder from double-B and up moving by less than two points.

Again, the only losers in this respect were single-b-bonds, which widened 24 basis points in relation to Treasurys.

Indicative Corporate Bond Yields/Spreads

(10-year industrial, option adjusted) (Wk ending July 19-2001)

Rating** Yield Spread* Yield Spread* Yield Spread*
AAA 5.588% 83 5.702% 83 7.397 105
AA 5.773 99 5.904 100 7.523 126
A 6.215 133 6.351 135 7.823 155
BBB 7.071 205 7.194 205 8.434 212
BB 8.901 400 9.014 398 10.288 394
B 13.158 823 13.036 798 11.948 561
C 25.607 2061 25.821 2068 20.864 1460

Click here for last week’s article, chart.

* Basis points over Treasurys ** Standard & Poor’s

Source: Merrill Lynch & Co.

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