Corporate Bonds Still In Play
Corporate Bonds - 6 reasons that an investment in Corporate Bonds is still warranted.
1. Easy monetary policy
Fed Funds Rate 1988-2010
2. Low Treasury yields
10 Year Treasury 9/30/80-6/30/10
3. Weakening inflationary expectations
Consumer Price Index YoY 9/30/80-6/30/10
4. Global growth outlook that is softening but still positive
US GDP 9/30/80-3/31/10
5.Strong corporate balance sheets
A Standard & Poor's analysis of large-cap companies found that they had a record amount of cash and equivalents at the end of 2009. Excluding financial, transportation, and utility companies (which hold lots of cash to operate), S&P 500 companies had $831.2 billion in their coffers, 36.3% more than when the recession officially began at the end of 2007.
Current Bloomberg data shows that the entire S&P 500 Index has $1.28 trillion on hand, more than twice the $596.5 billion on hand in 2003 after the end of the last recession.
According to Bloomberg, the companies in the S&P 500 generated free cash flow over the past 12 months of $883.4 billion, 119% more than in 2006.
6. Strong corporate profits