PORTLAND, United States — Corporate bonds are outperforming government securities, even as both decline, as analysts say the world’s biggest economy is improving enough for the Federal Reserve to raise interest rates before year-end.
Company debt has fallen 0.2 percent during the past three months, compared with a 1.2 percent loss for sovereign securities, Bloomberg Barclays indexes show. Nike Inc. sold $1.5 billion of notes Tuesday, reflecting demand for higher yields than those offered by government bonds, some of which are below the rate of inflation.
“Do you really want to be holding long-term assets at negative real yields?” said Bill Bovingdon, chief investment officer at Altius Asset Management in Sydney, who has 30 years of experience in fixed income. “We’re still in that search-for-yield environment.”
The benchmark US 10-year note yield was little changed at 1.74 percent as of 11:23 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.5 percent security due in August 2026 was 97 26/32.
Corporate bonds yield 117 basis points more than government securities on average, with investor demand for company debt compressing the difference to the narrowest in 16 months.
Yields on two-, three-, and five-year Treasuries are all less than the rate of inflation, while those on 10-year notes are only 24 basis points after accounting for consumer prices. Germany and France both have negative real yields.
Nike sold $1.5 billion of 10- and 30-year debt, based on data compiled by Bloomberg. The $500 million of 3.375 percent 30-year securities were priced to yield 93 basis points more than similar-maturity Treasuries.
By Wes Goodman; editors: Garfield Reynolds, Nicholas Reynolds and Tomoko Yamazaki.