Credit spreads continue to tighten today, as evidenced by the yield spread between Fannie Mae's 10-year notes and 10-year Treasuries, which today is at 62.5 basis points, down 5.3 basis points on the day and well below the peak of 97.7 basis points on March 14. The 10-year swap spread is down 0.5 basis points to 61.5 basis points. This is higher than last week's low of 59.8 basis points (Wednesday), but still much lower than the recent peak of 91.3 basis points (March 6th). Moreover, in the context of the 15-basis-point rise in the yield on 10-year Treasuries, the steadiness in swap rates at lower levels is encouraging.
Last week I mentioned that large declines in swap spreads that occurred the past two times in August and November coincided with increases of about 1,000 points in the Dow, an idea that has been largely fulfilled yet again. As for corporate bonds, data at Thursday's close indicate that Baa-rated corporate bonds yielded 6.76%, down 6 basis points on the day and 23 basis points below the March 11 peak.
Tony Crescenzi Blog Dow Hits Key Fibonacci Level 3/24/2008 12:32 PM EDT Exactly 38.2% of the losses have been retraced.
Tony Crescenzi Blog Housing Inventory Figures Shrinking -- As Suspected 3/24/2008 11:04 AM EDT If the housing supply can keep shrinking, this crucial part of the economy could spring back to life later this year.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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