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The new safe haven for investors looking for ways to stash their cash somewhere other than uncle Sam's pocket.
As a recent Wall Street Journal article pointed out.
Money is pouring into highly rated US corporate bonds in an even faster pace than treasury debt that's according to fund tracker Lipper.
But he's a Smart move -- that's Anthony Valeri fixed income strategist for LPL financial.
And many thanks for coming on tonight really appreciate your time.
You know admittedly this seems to be as small phenomena -- but -- is troubling especially when we're looking -- another potential downgrade of treasuries.
I want -- show folks what's going on here with a full screen.
Is our corporate bonds as safe haven for investors in if you look at the yields.
On Exxon were actually looking at specific bond there and US treasury debt.
The coming together.
The yields on -- on debt and secondary market plummeting falling close to treasury yields and that would seem to indicate -- people think their super safe.
What do you say to that Anthony -- Well -- Exxon is -- credit and so are some of the other.
High quality corporates out -- Johnson & Johnson is another -- talking about essential service type industries very good credit quality but they are not a safe haven replacement for treasuries -- And the last two days by.
But alas today's they are not because at the end of the day.
You don't he can't replicate.
What you have in the treasury market -- deep liquid market.
Easily tradable yes you can use an ExxonMobil you can use -- Johnson Johnson but at the end of the day.
There's only four triple -- rated corporate bonds you have about twenty double a true double -- incorporated corporate bonds is just not enough of a market there to make a true.
Safe haven alternative -- So you're saying that there's not enough of them out there that's one thing.
But does -- tell you something about the expectations of investors.
When they opt opt for this corporate debt rather than treasury debt when you make of that are there concerns about treasuries that a bubble is building.
Or that that -- gonna get downgraded again.
But -- Jerry I would say that treasuries are no doubt very expensive.
But I would also argue that Exxon and Johnson & Johnson are also.
Very expensive and yes you can use those credits but.
The last two days in the marketplace have been a very good example we've seen investment grade corporates even those names weaken a little bit relative to treasuries so the in the event of a true flight to safety you're still gonna see treasuries outperform.
Now you do want to be.
Invested in investment grade corporate corporates we -- LPL financial recommend an overweight to investment grade corporates because credit fundamentals yes are very good.
And you get a significant additional yields that's where you wanna people are -- but again.
They know it's -- I think it.
The -- this whole thing struck the EU said that a flight to quality would benefit treasuries.
I'm wondering if professional investors are re thinking that right now.
That may be at the end of the day what they really want is Exxon and not the US government is that possible Anthony.
But for some investors it is possible and I would argue that yeah for a hike volleyball and alternative that makes sense but there's just not enough of -- to go around -- the you have to look at the broader.
Market really the Fed's driving a lot of this quite frankly -- driving investors into those corporate bonds that don't have much alternatives and outside -- fed purchases the bond market.
Is shrinking wow.
Anthony thanks for coming on tonight appreciate your time it's an interesting story.
-- to wait and see -- the trend -- appreciate -- -- -- say that I'd say even in the event of let's just say that treasuries do have a fiscal crisis here.
The treasury is still not going to default they'll probably ramp up the -- presses to pay off that debt if interest rates go higher -- At that next week primaries there and any effect at at that that -- celebrate it.
-- entire bond market not we're just not just treasuries are able thanks for coming on appreciate your insight.
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