Daily Spotlight: Bond Spreads Narrow

Argus

•

Mar 10, 2025

Summary

Treasury bond yields have been falling in recent weeks as concerns over economic growth have returned amid the tariff and immigration debate, as well as from the job-cutting in Washington, DC. Meanwhile, corporate bond yields have headed lower as well, but not as rapidly as Treasury yields, this as fixed-income investors are focusing more on high corporate cash levels and balance sheet strength. As a consequence, spreads between corporate and Treasury bond yields have widened, though they are still tighter than historical averages. For example, the spread between AAA-rated corporate bonds and 10-year government bonds in February was 104 basis points (bps), up from 52 bps in December but still lower than the historical average of 104. The gap between the government 10-year bond yield and a BAA-rated bond (still investment grade) in February was 14 basis points, below the historical average spread of 228 bps but wider by about 50 bps in the past two months. We watch these spreads closely for several reasons. One, from an asset-allocation standpoint, tig