Long Term Perspective
The spread between the yield on the 10-year Treasury note and yields on industrial bonds was generally lower than the spread between the Treasury bond and Corporate bonds. The spread was lower across the board from the highest rated (Aaa) to the lowest rated security (Baa).
| Spread between Treasury Note and: | 1990s Average | 2000 to 2002 Average |
| Aaa Industrial Bond: | 93 basis points | 164 basis points |
| Aa Industrial Bond: | 121 basis points | 184 basis points |
| A Industrial Bond: | 138 basis points | 229 basis points |
| Baa Industrial Bond: | 186 basis points | 271 basis points |
Short Term Perspective
Yields appeared to come down in tandem in December but remain wide between industrial bonds and the 10-year Treasury note. This typically happens as economic conditions deteriorate because default risk increases. Investors are not seeing strong signs of recovery.
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