10-Year Treasuries And AAA Corporate Bond Rates Aligned [Chart]

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10-Year Treasuries And AAA Corporate Bond Rates Aligned [Chart]

10-Year Treasuries And AAA Corporate Bond Rates Aligned [Chart] by Todd Sullivan, Value Plays

“Davidson” submits:

Was looking to see if recent corp issuance had driven long rates higher, but AAA Corp and 10-Year Treasuries look like they trade in lock-step with ~160bps spread. I see a daily shifts in 10yr and AAA Corp mirror each other.

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My intuition tells me that it is corp issuance demand for capital which is pulling rates higher, i.e. higher rates needed to have investors willing to buy debt and issuers are likewise willing to pay because they believe they will get returns above their interest costs. This is the way I interpret all rate moves. I do not expect the Fed to move till T-Bill rates rise above FFunds rates.

Let me know if you have any thoughts on this.

Updated on

Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.
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