Barron's Confidence Index Back at Pre-Crisis Levels

by: Prieur du Plessis

The Barron’s Confidence Index is an indicator worth monitoring. This Index is calculated by dividing the average yield on high-grade bonds by the average yield on intermediate-grade bonds. The discrepancy between the yields is indicative of investor confidence.

As shown below, there has been a solid improvement in the ratio since its all-time low in December 2008, showing that bond investors have grown significantly more confident, opting for more speculative bonds over high-grade bonds. The ratio is back at levels last seen in October 2007 and now at the bottom end of the 80–90 range that prevailed pre-crisis.

[Click to enlarge]

Source: I-Net Bridge