Bond Rates - Treasury vs Corp - Don't make sense

[kmiklas]

Heya folks,

Find below screenies of bond rates from two different brokers.

In the first screenie, they make no sense to me at all. Specifically, in the first, why is the yield for Corp AAA and even AA bonds priced below Treasury rates?

• We all know that T bonds, backed by the full faith and credit of the US Government, are "essentially" risk free. Since there is inherently more risk in a corporate bond, why is this not showing in the rates?
• In other words, I would expect that the yield on a Corporate bond would be higher to compensate for the additional risk.
• In yet other words, it is not a rational decision to invest in a corporate bond at a lower rate than a treasury bond.

I must be thick as a brick on this one.

Also, looking at CD rates trading higher still than T-bonds, there must be some nice buys out there for 6-7%. I see these offers from a different broker.

Thank you for your help.

Sincerely, Keith

 

[SunTrader]

No idea, though looming debt ceiling level is approaching once again.

And I think I read somewhere of a possible downgrade of Treasuries like one of the last time we went through this.

 

[murray t turtle]

%%
SAy SCHW gets the research right; even though i have found some serious errors in thier ETFs data[not daily errors but YTD, 3 ty, 10 yr+ IBKR volume ]. Fine with me if the bank regulators want to talk thier book+ sort of promote gov bonds as ''risk free''
NOt every bank buyin' gov bonds is as bad as SVB..............................
So even your chart shows 3 years+10 years + mini limited tax free looks much better than the other choices.
VTEB> SPTI.
I wonder why\ when Carl Ichan rebuked Mr Fink , to his face of ESG-BLK on thier non liquid bonds funds. Mr fink had no answer LOL.
No wonder Dave ramsey likes good stock funds>+ beans more than bonds.
Bonds make so little i used Vanguard etf low fee example

 

[kmiklas]

No idea, though looming debt ceiling level is approaching once again.

And I think I read somewhere of a possible downgrade of Treasuries like one of the last time we went through this.

Downgrade US Treasuries??? You must be smokin' some good stuff!

The US Dollar, Currency, and Treasuries are as good as it gets for a store of value in this world.

 

[2rosy]

Which Corp yield is less that government? I don't see any

 

[mervyn]

Corp papers were issued long ago when the benchmark is near zero. Now you can’t find any new papers less than the benchmark.

Apple 10-year note due 2029 has a coupon 2.2%, the bond price is at 88.50, so you can make 11% if you hold to maturity, plus 2.2% interest per year, while UST due 2019 is trading at 95.51.

Definitely not pricing below Ts.

 

[kmiklas]

Which Corp yield is less that government? I don't see any

Short-term: 3, 6, 9mo

 

[kmiklas]

Corp papers were issued long ago when the benchmark is near zero. Now you can’t find any new papers less than the benchmark.

Apple 10-year note due 2029 has a coupon 2.2%, the bond price is at 88.50, so you can make 11% if you hold to maturity, plus 2.2% interest per year, while UST due 2019 is trading at 95.51.

Definitely not pricing below Ts.

1. 037833DP2?
2. Also, I'm talking about the posted short-term (3, 6, 9mo) rates from Schwab in the screenie above.
3. How did you arrive at 11%?

 

[MrMuppet]

3. How did you arrive at 11%?

Perhaps he doesn't have one iota of an idea about bond math and confuses total return with anual yield?


look @kmiklas, why don't you put on a relative value trade here? Whenever two instruments with different risk profiles have the same cashflow something is not right. Instead of trying to find out why that is the case, throw some money at it.

Find a way to structure a good risk/reward and go for it.
I mean, the 7-eleven 2year corborate bond yields 5%. I would easily spread that against 2y treasuries, the risk is basically zero.

 

[kmiklas]

Perhaps he doesn't have one iota of an idea about bond math and confuses total return with anual yield?


look @kmiklas, why don't you put on a relative value trade here? Whenever two instruments with different risk profiles have the same cashflow something is not right. Instead of trying to find out why that is the case, throw some money at it.

Find a way to structure a good risk/reward and go for it.
I mean, the 7-eleven 2year corborate bond yields 5%. I would easily spread that against 2y treasuries, the risk is basically zero.

I have more than an iota, but am still learning.