The Thirst For Yield Is Quenchable

The Thirst For Yield Is Quenchable

Consider, even BAA bond yields minus 10-year Treasury paper normally runs at 250 basis points, but today is closer to 100.. When the bond players sniff recession in the air premiums widen to as much as 350 basis points, almost overnight.. During the financial market meltdown of 2008 - 2009, yield premiums spiked to 650 basis points.. Even in the tech bubble-induced recession of 2001, yield premiums on BAA corporates zipped up from 150 to 350 basis points and then declined steadily for the next five years.. In a weakening state, junk bond yields can range easily between 500 and 700 basis points above five-year Treasuries.. A chart on 10-year Treasuries mimics the chart on 30-year maturities.. Preferreds haven't participated in the bull market for Treasuries and corporates.. I can't dredge up an economic cycle when interest rates for Treasuries and AAA corporates yielded so little.. Money-market rates ticked at 0.2% with two-year Treasuries at 60 basis points and 10-year paper at 0.82%.. By the mid-seventies, the rate of inflation rose to 7%.. Treasuries sold to yield near 8% thereby capturing the rate of inflation.. For bonds to see a real yield of 5% much depends upon perception of the