MOUNTAIN VIEW, Calif. - Quality comes cheap in bonds right now.
Differences in yields between higher and lower quality bonds are tighter than they have been at almost any time in the past 10 years, according to The Benham Group, a mutual fund company in Mountain View.
Since the end of 1990, the extra yield earned by A-rated bonds over Treasuries has fallen by more than half a percentage point. Within the corporate bond sector, spreads have been cut almost in half.
"If you're thinking of going into a high-yield bond fund, there's less incentive now to buy the riskier grades. In money market funds, the government-only types - where credit risk is to all intents and purposes zero - are paying only fractionally less than most run-of-the-mill funds," said Randy Merk, senior vice president.