Monday Corporate Bond Brief

Andrew Wilkinson submits: Investors seem unsure how to react within the confines of the corporate bond market to rising risk aversion around the world. Government bond prices are shifting in all sorts of directions in response to panic over sliding stocks, growth and earnings fears and rising political tensions in Europe. Some financial names are weaker Monday with spreads widening relative to U.S. government debt, while broadly speaking volumes are a little calmer than last week.

Andrew Wilkinson submits: Volatile trading characterized a cautious government bond market where the 10-year U.S. treasury surged to yield the least in seven-months before reversing to losses sending yields marginally higher on the day. Yield spreads between government and corporate debt largely narrowed as investors were comforted by more or less stable equity markets after the European Central Bank allegedly intervened to support Italian and Spanish bond markets.

Andrew Wilkinson submits: Banking names were again coming under the hammer in the corporate bond world as financial paper continued to suffer as government bonds failed to follow-through on a positive start. Spreads continued to widen as buyers took another step back. Morgan Stanley, Goldman Sachs and Bank of America each saw its bond prices take a hit as yields crept higher while British bank Lloyds TSB saw its five-year maturity take a loss of $2.00 as yields jumped.

- By Pat Stout:The following is a review of the U.S. Treasury yield curve for June 15, 2012 to June 22, 2012. During the week there was no change in short-term yields, while yields on issues maturing from 1-year to 30-year moved higher. See chart below. Change in Basis Points Chart: Yield Curve Chart: Charts source data: treasury.govThe 10-year less 2-year spread increased 7 basis points, from 131bp to 138bp.

Andrew Wilkinson submits: Corporate bond trading was lackadaisical on Monday with relatively benign action, although the trend was unambiguous as financial names continued to suffer from investor selling. Government bond yields appear to have fallen just about as far as they can go with yields benefitting over the past two months with the tailwind of data indicating a slowing economy and less fear over inflation.

Chart showing corporate and government bond yields by Curious Cat Investing Economics Blog, Creative Commons Attribution, data from the Federal Reserve. The changes in bond yields over the last 3 months months indicate a huge increase in investor confidence.

Chart showing corporate and government bond yields by Curious Cat Investing Economics Blog, Creative Commons Attribution, data from the Federal Reserve. The changes in bond yields over the last 3 months months indicate a huge increase in investor confidence.

David Levy submits: In the current environment where yields on U.S.