Yield spreads tighten on ‘Magnificent Seven’ corporate bonds

An earlier version of this article included an incorrect reference to yields narrowing on corporate bonds.

Corporate-bond investors have been net sellers of five out of the seven so-called Magnificent Seven components of the S&P 500
SPX,
according to market data in recent days.

Meanwhile, the spreads on yields have tightened between bonds for the Magnificent Seven and 10-year Treasurys
TY00,
+0.55%
(see chart), in a sign of healthy demand.

“Spreads have tightened and investors have chosen to be net sellers into the strength,” a source familiar with the bond market told MarketWatch. “Although spreads have tightened, there have been more sellers than buyers of the bonds.”

Yield spreads between corporate bonds of the Magnificent Seven and 10-year Treasurys have tightened.

BondCliQ Media Services

With the exception of Apple Inc.
AAPL,
+0.05%
and Meta Platforms Inc.
META,
+0.85%,
net selling has outpaced buying in corporate bonds for the Magnificent Seven, as the spreads have narrowed.

Microsoft Corp.’s
MSFT,
-0.16%
corporate bonds have drawn the the heaviest selling, followed closely by Amazon.com Inc.’s
AMZN,
-0.05%.

Alphabet Inc.
GOOG,
-0.97%,
Tesla Inc.
TSLA,
+1.88%
and Nvidia Corp.
NVDA,
+0.28%
have also seen more sellers than buyers (see chart).

Sellers have outnumbered buyers for all but two of the corporate bonds of the Magnificent Seven.

BondCliQ Media Services

The stocks have been in the spotlight for much of 2023 as the biggest contributors to the 24.3% rally in the S&P 500
SPX.

The stocks have remained hot through this season’s Santa Claus rally as expectations build for the U.S. Federal Reserve to start cutting interest rates in the first part of 2024.

Also read: A record share of S&P 500 stocks have underperformed the index in 2023 as ‘weirdest bull market in decades’ marches on

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