Axon Enterprise, Inc. (AXON) Stock Forecasts

Summary

Treasury bond yields have been rising in recent weeks as concerns have mounted over the White House’s fiscal policies and the high level of federal debt. Corporate bond yields have headed higher as well, and at a faster rate than Treasury yields. As a consequence, spreads between corporate and Treasury bond yields have widened, though they remain tighter than historical averages. For example, the spread between AAA-rated corporate bonds and 10-year government bonds in May was 114 basis points (bps), up from 52 bps in December but still lower than the historical average of 122 bps. The gap between the government 10-year bond yield and a BAA-rated bond (still investment grade) in May was 189 basis points, below the historical average spread of 228 bps but wider by about 50 bps since the presidential election. We watch these spreads closely for several reasons. From an asset-allocation standpoint, tight corporate bond spreads signal that corporate bond prices are above historical fair value, and we may look to under-weight the segment in our model portfolios. From a broad market standpoint, the changes in the spreads offer clues to the bond market’s view of corporate financial strength, which ap