Bonds issued by corporations with top credit scores now have lower yields than Treasurys due this summer as investors look to hedge their bets on a potential US default.
While Wall Street largely expects lawmakers to reach a deal on lifting the debt ceiling and avoiding default, negotiations between the White House and Republicans in Congress have dragged on. In recent days, investor demand for top-rated corporate bonds have bid up those prices, sending their yields down and revealing varying assessments of risk.
For example, Microsoft bonds that are due August 8 have traded with a yield just above 4%, according to Solve Data metrics cited byJohnson & Johnson's bonds due in November have yields that are nearly a percentage point below those of Treasurys with a similar maturity, the Journal said. In less turbulent periods, corporate yields are above Treasurys. But now more investors are paying a premium to buy lower-yielding corporate debt, preferring it over traditionally"risk-free" Treasurys.
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