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Corporate Debt Is the New Safe Haven
Once upon a time, like two weeks ago, the credit issued by major industrial nations was considered the ultimate safe haven for investors. That may be a little less true today than it was.
The debt issued by Greece, Spain and a few other European countries is raising fears of default. And Moody's says even the Aaa rated debt of the United States, the U.K. and Germany is at risk of a downgrade, a once unthinkable outcome.
As sovereign credit comes under fire, investors are beginning to treat the highest-rated corporate debt with the deference once accorded the biggest and most powerful states.
And that is a boon for corporate borrowers, who are benefiting from ever-lower rates, even as sovereign issuers such as the U.S. are paying more for longer-dated maturities. Corporate debt yields are now 1.56 percentage points higher than Treasury yields. The premium is less than one third of last year's spread. In the future, Uncle Sam may mean Uncle Sam Walton from Wal-Mart.
Steve Rosenbush is the blogs/industry editor for Portfolio.com.
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