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Corporate bonds, bets on the repayment of corporate debt, are experience a sustained rally. Investors are showing a renewed confidence in the global economy as they grab new debt securities in a variety of companies recent capital raises. This rally is currently the longest in four month–approaching the six day bond rally in March 2010.
Retailer Target Corp. was able to raise $1 billion in their bond sales, the first in two years. And in the International markets Dutch chipmaker BV, whose credit ratings are considered in the range of junk bonds, raised $1 billion as well. As a broader indication relative yields fell on more than 8,500 bonds represented in the Bank of America Merrill Lynch’s Global Broad Market Corporate Index for the fourth straight day.
Despite the fears created by the recent fiscal troubles of Greece, optimism seems to be returning for an economic recovery. Greece was able to sell its bills yesterday at interest rates below European Union and Internal Monetary Fund bailout rates–creating some feeling of stability in that region.
On another key front for economic sentiment–mortgage bonds–are showing record low yields. Fannie Mae and Freddie Mac mortgage bonds are approaching record lows relative to US Treasuries, another positive sign.
This is likely to signal a pending increase in mortgage interest rates, but positive economy recovery.
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