Corporate bonds are offering yields lower or only slightly higher than US Treasuries. While this has happened in times past, it is not a regular occurrence. Corporate bonds have different levels of risk like sales, expenses, and other operational risks. US Treasuries don't have these risks, and they are backed by the full faith and credit of the US government.
A bond with fewer moving parts, less exposure to business cycles, and no explicit guarantee equal to a country's guarantee should have a higher yield than US Treasuries. On the face of it, there is less risk, fewer risk factors in owning US Treasuries versus corporate bonds. It stands to reason that the act of getting paid back is higher with government bonds than corporates.
Microsoft bonds of the same maturity as US Treasuries trade at a lower yield than US government debt. Nvidia only offers an investor .10% more yield to take the operational risk of Nvidia and the payback of their debt. Even Apple, a company that has a decent level of debt, only offers about 20-30 basis points above USD, or .2% more than US Treasuries.
Are investors being complacent about the risks of corporates like Microsoft, Nvidia, and Apple? Are they blinded by the perceived potential of AI and all related to it? Or is it US treasuries that people are concerned about, thus explaining the little yield differential?
Perhaps investors are transferring optimism from the equity market into the bond markets. Due to AI, companies like Nvidia and Microsoft are the stock market darlings right now. But this is tricky because in the corporate fixed interest rate bonds there is no variability for better profits or earnings; the interest rate is fixed.
But perhaps the explanation lies with the US. It could be that US Treasuries are out of favor because of the problems with the US economy, like excessive government debt, unreliable economic data, inflation that does not look to be getting any better, and the risk of the Central Bank's independence being put into question in the future.
With concerns like these it is no wonder investors prefer corporate bonds to US government bonds. In the end, investors do not put much credibility in the "full faith and credit" of the US government.
If investors put little faith in US government bonds, what could that say about the US dollar. If investors don't buy US treasuries, they don't buy dollars.
Confidence in the US dollar has been waning for most of 2025. If it continues the US dollar could weaken further against currencies in Europe, Asia, and Latin America. Given US dollar stable is over 90% of the stable market, crypto investors really must think about this. Is US stable good for collateral? If the USD goes down, the answer is no.
Given concern surrounding the US dollar it makes sense for crypto investors to diversify away from the US dollar. On that note, no one can argue dumping all US dollar stable in a portfolio, but exposure to Mexican bonds like CETES, where Etherfuse offers a yield, and Brazilian Tesouros with an APY continue to make sense.
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