Long Term Perspective
The spread between the 10-year Treasury note yield and industrial corporate bond yields was wide even when economic activity was robust in the late 1990s. The wide gap during the recession and early stages of recovery was not surprising however. Yield differences moderated for energy and manufacturing, although not entirely for the transportation sector in 2003 through 2006. The transportation sector includes the sickly airline industry, thus it is not surprising that yields in this sector were higher than the rest even in 2003 and 2004.

Short Term Perspective
Yield spreads between corporate bonds and Treasuries were generally higher in 2005 than in 2004, but the only exception is for transportation bonds which saw a dip in the spread to 122 basis points from 134 basis points in 2004. Energy bond yields were 91 basis points higher than the 10-year Treasury in 2005, up from a 74 basis point spread in 2004. Manufacturing bond spreads more than doubled to 145 basis points in 2005 from 67 basis points in 2004. These spread have come down from even higher levels early in 2006. In November, the spreads for transportation, energy, and manufacturing were 94 basis points, 109 basis points, and 91 basis points

Corporate bond yields in the transportation sector fell 11 basis points, energy sector yields fell 13 basis points and manufacturing sector yields fell 13 basis points in November. The 10-year Treasury note yield was down 13 basis points.