Stats › Valuation › Corporate bonds
Credit risk paid 137 basis points a year over Treasuries
| Segment | Excess return a year | Sharpe ratio |
|---|---|---|
| Investment grade, 1936 to 2014 | 137 basis points | 0.37 |
| High yield, 1988 to 2014 | 248 basis points | 0.26 |
| S&P 500, 1936 to 2014 | 0.50 |
Excess return over duration matched Treasuries, which strips out interest rate risk and leaves the compensation for default and downgrade. No comparable equity excess return is published in the same study, so that cell is left blank. Source: AQR, The Credit Risk Premium, Journal of Fixed Income.
US companies borrow by issuing bonds, a $11.7 trillion market. Since 1936 investment grade credit has paid 137 basis points a year over duration matched Treasuries, on a Sharpe ratio of 0.37. The premium is real, and smaller than the equity one.
Members only
The rest of this page is for members
Below this point there are 8 sections, 2 charts and 5 named sources, roughly 1250 words of it. Every figure carries the source it came from and the date the data is from.
You can keep browsing every statistic in the library for free. The intro and the summary are always open.