How pathetic is this?
In a very, very rare circumstance, the debt issued by corporations, i.e. corporate bonds, is worth more than comparable term US treasury bonds. How do you tell? Look at the yield. Corporate bonds issued by Berkshire Hathaway, PG, JNJ, and LOW just to name a few, sport yields 3.5BP less than US treasuries of comparable terms.
As noted, this happens very rarely. It happens when the US outlook is viewed as less safe than that of corporations. The driver? The US debt and the debt to come. Moody's has already said if the US stays on this debt course it is going to lose its AAA credit rating.
The budget deficit is now 10% of the GDP, a post-WWII high. The US has the highest debt service cost (debt as a percent of revenue) of any top rated country with the exception of the UK. In 2010 it is 7%. By 2013 it will be 11%. That is not including the healthcare plan that will, despite absolutely bogus projections that count as savings money to be used elsewhere, don't count over $200B in increased doctor payments under Medicare, and that don't count $150B in administrative costs, balloon the spending. If you doubt, look to Massachusetts and its plan that cost 40% more than expected in just three years, Medicare that cost 10 times as much as projected, and Medicaid that cost 100 times as much as projected. The US won't save money by creating entitlements. When each has been passed it was going to save money over the private system. Each time it has taken us several steps toward breaking the bank.
This one will do it. That is why before passage corporate bond rates were lower than US Treasuries (indicating less risk and thus they had to offer less to attract buyers) and they are going to be an even better bargain as these costs become more apparent.
