Credit spreads on AAA-rated corporate bonds have fallen sharply from their historical levels. Take for example the 3-year and 5-year bonds. They are currently trading at yields of 6.4% and 6.9% respectively, only 8-9 basis points (bps) higher than similar tenure government bonds (g-secs), shows data from Bloomberg. Going by the last 10 years’ average, these bonds have traded at significantly higher spreads of 82 bps and 74 bps, respectively.
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