Long Term Perspective
The wider spread between the risk-free Treasury note and the AAA corporate bond in 2000 does not suggest a worsening of credit conditions. Rather, it reflects the reduced supply of Treasury securities as the federal government recorded its second straight federal budget surplus. This puts a lid on Treasury security yields.

Short Term Perspective
Fears of economic recession increase the default risk even of high grade bonds. As a result, yields on AAA corporate bonds have been roughly unchanged since August.

2-year Treasury Yield & Spread to Fed Funds   •   30-year Treasury Yield & Spread 30-year less 2-year

Yield Spread: AAA Corporate vs. 30-year Treasury   •   Yield Spread: Baa Corporate vs. 30-year Treasury

Yield Spread: Bond Buyer vs. 30-year Treasury