Question:

What accounts for the difference between treasury bond rates, and corporate bonds?

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Specifically regarding US Treasury prices and yields on a 30 yr bond, and a big corporation like GM?

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3 ANSWERS


  1. Risk. GM and other corporations might default on their bonds. It's nearly impossible for the US to default on their bonds. So corporations need to pay a higher rate.


  2. (1) Risk of paying late or defaulting completely.

    (2) Taxes.  US debt is exempt from state and local income taxes, which make them desirable for people in places like California and New York city, where state and local combined can be 12%.

  3. Default risk

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