High Yield Spreads Fall Below Pre-Lehman Levels

For the first time since the recovery off the March lows, high yield credit spreads fell below their "pre-Lehman" levels. Based on data from Merrill Lynch indices, high yield bonds are currently yielding 835 basis points more than comparable Treasuries. This compares to a level of 854 bps on 9/12/08, which was the Friday before Lehman's bankruptcy.

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While credit market benchmarks have mostly recovered to "pre-Lehman" levels, equities still have a ways to go. Even after the historically strong rally off the March lows, all three major indices and all ten major S&P 500 sectors remain below their "pre-Lehman" levels. While the S&P 500 has gained nearly 60% from its lows, the index would still have to rally an additional 17.4% to reach its level from the Friday before Lehman's bankruptcy.

Comments

[Joe Shareho...:]

Wait until next year, basis yields will double

Sep 17 12:14 AM