Yes, that helps. Thanks for taking the time to reply.

I don’t fool with corporate bonds. But I remember my father, who was a devout bottom fisher, many years ago loved to buy bonds selling for a dime or two on the dollar. He just couldn’t resist the mouthwatering yields. But he eventually gave it up, so I assume that game ended up a net loser.

KJ – Corporate Bonds are tough for retail investors like you and me. In my opinion we need more corporate Bonds on exchanges with efficient clearing houses rather than this OTC nonesense we are subjected to. Bond funds suck most of the time they behave more like stocks than bonds. Anyway this might help your question:

This Index is calculated by dividing the average yield [return if held to maturity] on high-grade [investment grade] bonds by the average yield [return if held to maturity] on intermediate-grade [almost junk ] bonds… A declining ratio indicates that investors are demanding a higher premium in yield [a higher return if held to maturity] for increased risk, showing waning [less] confidence in the economy.

I was not familiar with the Barron’s Confidence Index, and I am a little confused on its calculation. It seems like the ratio of high-grade yields to intermediate yields would be a pretty small, like maybe ¾ or 5/7 or 7/10 or something wouldn’t it? I don’t follow the bond markets so I don’t know what the yields are now, but the chart shows an index of somewhere around 47, so I have no idea what that represents.

Also, I’m not sure what this means, “… investors are demanding a lower premium in yield for increased risk,…”. Does lower premium mean lower price, i.e. they are demanding lower bond prices for increased risk?

Sorry for the ignorant questions; just trying to learn.