MPV - The Capital Pain Of Reaching For Marginally Higher Yields
Reaching for marginally more yield in corporate debt and equities, while taking on much higher capital risk, is dumb money management. And yet, it continues to be the consensus financial recommendation.
Today, because BAA-corporate bonds have been indiscriminately bought at high prices, their yield spread or net income benefit compared with much more liquid and secure, US 10-year government treasuries. is less than 1.9%. As shown in the chart below, this yield spread is the lowest it has been since 2006 when it fell to a foreboding 1.6% . That was just before the Great