Demand Keeps Spreads Tight
by Russ MacKay
With the market’s uncertainty of the economic outlook we have seen a huge rally into U.S. treasuries, moving from 3.73% in February of this year to the 2.23% level today.
The demand for fixed income has outpaced the fears of a weak economy as the spreads between the Government 10 year and corporate bonds have not widened as it did in 2008. Today the spreads are sitting at 168 bps and 171 bps for Canada and the U.S. respectively (unlike 2008 when they hit 364 bps in Canada and 450 bps in the U.S.).
You may still find opportunities in the corporate world where wider spreads are available, like the latest issues by Intact Financial, 2021 at 4.70% (225 bps spread), or Goldman Sachs’ 5.00% 2018 issue (255 bps).