As the economy recovers from a recession,what changes can be expected in the yield spread of corporate Baa bonds and U.S.government bonds?

Question

Quizplus · Accepted Answer

During a recovery from a recession, the creditworthiness of corporations generally improves and investors become more willing to invest in corporate bonds. This leads to a decrease in the yield spread between corporate Baa bonds and U.S. government bonds, as investors demand less compensation for the higher risk associated with corporate bonds. Therefore, choice A is the most likely option. Choice B is not relevant as the question is about the Baa bond-yield spread, not the BBB bond-yield spread. Choice C is unlikely as the yield spread generally narrows during an economic recovery, not widens. Therefore, choice D is incorrect.

As the Economy Recovers from a Recession,what Changes Can Be