No. of Recommendations: 6
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Corporate Bonds Are a Great Deal if You Don’t Look Too Closely
Highly rated debts offer high yields but are priced close to perfection
By Telis Demos, The Wall Street Journal, May 26, 2026
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An index of the bonds of the biggest, most creditworthy U.S. companies hit a yield of 5.3% this past week, its highest level in about a year, according to data from ICE BofA. With the 10-year inflation break-even rate at around 2.4%, that implies that high-grade corporate bonds could deliver real, inflation-adjusted returns approaching 3% over the next decade.
That is tempting indeed. But another way of looking at that yield is how much an investor is being compensated for the additional risk of corporate credit over U.S. Treasurys.
And, right now, investors are getting about as little for that extra risk as they have in a generation. That yield gap—or spread—has narrowed as Treasury yields have surged. It is hovering near its lowest level since the 1990s, according to the ICE BofA index… [end quote]
Bonds don’t look tempting. What about stocks?
Historically, investors were rewarded for the added risk of stocks with a higher earnings yield than bonds. But not anymore, while many stocks pay paltry dividends and prices are in a bubble.
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S&P 500 Earnings Yield - Multpl
S&P 500 Earnings Yield chart, historic, and current data. Current S&P 500 Earnings Yield is 3.09%, a change of -2.10 bps from previous market close.
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S&P 500 Dividend Yield - Multpl
S&P 500 Dividend Yield chart, historic, and current data. Current S&P 500 Dividend Yield is 1.04%, a change of -0.71 bps from previous market close.
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Shiller PE Ratio - Multpl
Shiller PE Ratio chart, historic, and current data. Current Shiller PE Ratio is 42.32, a change of +0.29 from previous market close.
There’s just too much money (much of it borrowed) chasing investments.
Wendy
