The figure below shows the spread between the corporate bonds rated Aaa and Baa and the Constant Maturity Treasury (CMT) yield. Discuss how changes in the spread will affect a corporation's financing activities in terms of their ability to issue bonds. Based on the figure, how does the credit rating of a particular company enter into the decision? Spread over a 10 year CMT 1953 - 2023

 

7 9 5 4 3 2 1 0 Juk-54 74-75 recession Jul-57 Jul-60 Jul-63 Jul-66 Jul-69 S&L Crisis Jul-72 Jul-75 Aaa Subprime credit crisis Spread 9/11 LTCM Jul-78 Jul-81 Jul-84 Jul-87 Jul-90 Jul-93 Jul-96 Jul-99 Jul-02 Jul-05 COVID-19 Baa Spread Jul-08 Jul-11 Jul-14 Jul-17 Jul-20