By Jacob Goldstein
That's very weird. Treasuries are supposed to be among the safest bonds in the world. But the market is saying that the U.S.A. is a riskier bet than Berkshire, the big conglomerate run by Warren Buffett.
The difference in yields between treasuries and the companies' bonds is very small -- less than one tenth of a percentage point (that's less than 10 basis points, in bondspeak). Still, it's worth noting, because corporate bonds almost always yield more than treasuries. A few factors are driving the current situation.
The big increase in U.S. debt is prompting some worries about the nation's long-term ability to pay its debts. "Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion," Moody's wrote last week in a note aimed at the U.S. and a few other big countries.
At the same time, big companies are cutting their debt levels -- a trend that reduces risks for bondholders. Companies in the S&P 500 cut their debts by $282 billion in the fourth quarter, to $7.1 trillion, Bloomberg says. The debt-to-asset ratio of these companies, a key measure of how much money companies are borrowing, is at the lowest level in at least a decade.