This is how you know the market is suffering a severe dislocation in valuations..
American Express (AXP) recently sold a bond issue that yielded 7.34%. 7.34%? for reference anything above 7% has typically be lumped in the category of “junk bonds”.
AXP, it should be noted is rated “A” by the Standard and Poors rating agency. The top rating AXP could have is “AAA” and typically junk bonds have rating 6 levels below that of “A”.
In the past AXP has issued debt in the 5% range which means bond investors are getting 40% more yield on AXP bonds currently and let’s be honest, the risk of default here is virtually non-existent.
It is strange times we are investing in……
Disclosure (“none” means no position):
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