Three numbers to start your day:
Despite Small Difference in Creditworthiness, A Gap in Yields Between U.S. Corporate Bonds
The typical gap between yields on U.S. corporate bonds with a BBB3 rating (the lowest tier of “investment grade” debt) and yields on corporate bonds with a BB1 rating, just one notch lower, is 1 percentage point, according to an analysis from CreditSights.
Investors have long penalized companies in the BB credit tier because they are technically counted as “junk” bonds, even though their credit profile isn’t radically different from companies one level higher. For perspective, the gap between the yield on a typical 7-year AA-rated bond and a typical 7-year BBB2-rated bond, which is five notches lower, is just 0.8 percentage point.
That can explain the large gap in yields despite the small difference in creditworthiness.
18.5 Million Americans Could Lower Mortgage Interest Rate
18.5 million Americans with a current mortgage and good credit could lower their interest rate by at least 0.75 percentage points if they refinanced today, according to an analysis from the data analytics company Black Knight.
The typical interest rate on a 30-year fixed rate mortgage is now just 2.8%. That is the lowest it’s ever been, and far lower than the 4% average mortgage rate that is prevailed over the past few years. Many Americans who got mortgages recently—even as recently as the end of last year—are in a good position to save money by refinancing.
Black Knight estimates the average mortgage borrower would save roughly $300 each month after refinancing, with 2.5 million borrowers saving more than $500 each month.
U.S. Nonresidential Construction Spending His $66 Billion for September
That is on a seasonally-adjusted basis, equivalent to $794 billion at an annual rate. Nonresidential construction spending is down 1.6% since August and down 6% from the level in March.
Unlike the home-building sector, which has boomed thanks to the potent combination of low interest rates and pandemic-induced migration, commercial real estate and public infrastructure investment have both continued to shrink throughout the pandemic.
About half of the downturn can be attributed to state and local government cuts in investment in roads and bridges, which has dropped about 20% since March. Most of the rest can be explained by lower investment in “amusement and recreation” facilities, the power sector, hotels, semiconductor foundries, and aerospace factories.
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