Bond Market Says Safer to Lend to Buffett than Uncle Sam

Yields on some corporate bonds are now lower than US Treasuries, a very rare occurrence that indicates investors are beginning to perceive cash rich companies as safer places to stash money than debt-ridden Uncle Sam.

According to Bloomberg:

"Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market."

In a sense the market is questioning the AAA rating of the US government. An avalanche of debt is expected to put further pressure on Treasuries even as a relative scarcity of high qualitty corporate bond offerings increase yields. If borrowing and deficits continue, then we can expect more of the same.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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