Spread Between Low and High Risk Bond Yields Widens Dramatically

Since mid-October, the spread between low-risk bond yields and higher-risk bond yields has widened dramatically. Here's a look at the difference between BAA bond yields and AAA bond yields.

The ratio is the AAA yield divided by the BAA yield. The ratio is now at its lowest level in nearly five years.

Since 1986, the market is net down when the ratio is below 0.85.

Comments

[whidbey]

When the yield curve steepens the equities tend to fall. Is that the conclusion? Or could it be two year bonds are underpriced? We really do need to know.