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Thursday, November 13, 2008

Record Spreads between 30 Year Corporate and Treasury Yields

by Calculated Risk on 11/13/2008 02:30:00 PM

Here is another measure of credit stress. The following graph shows the spread between 30 year Moody's Aaa and Baa rated bonds and the 30 year treasury.

The Moody's data is from the St. Louis Fed:

Moody's tries to include bonds with remaining maturities as close as possible to 30 years. Moody's drops bonds if the remaining life falls below 20 years, if the bond is susceptible to redemption, or if the rating changes.
Spread Corporate and Treasury Click on table for larger image in new window.

There are periods when the spread increases because of concerns of higher default rates (like in the severe recession of the early '80s), but the recent spread is unprecedented.