Just a very quick question,
Can someone clarify why long term coroporate bonds are considered to be less risky than long term government bonds?
What makes you think that they are so considered?
I am not sure where the original post came up with that ‘consideration’. But for friendly discussion, unless you are comparing to sovereign debt issued by an Emerging, and comparing it that with a Triple AAA Corperate. I can’t think of any other situations where Gov’t bond would be riskier than Corporate.
If the corporate has a higher coupon than the Treasury (of the same maturity) then it would have a shorter duration. I don’t know if this is what the original poster meant.
I have question back for you.
how do you define risk and riskier?
If you mean the total rist, then we know that there are bunch of different types of risks out there, some govt bonds maybe have lower default or credit risk ( theoratically very low for the domestic currency denominated sovereign debt). But maybe if you consider other risks, for example, interest rate risk, liquidity, reinvestment, bla bla bla`~~then the govt bond could be riskier. That’s why when we are calculating the yield spread or zero spread, we use on-the-run govt bond and all these yield spread contain a liquidity spread.
So, under certain situation, the risk of long term govt bond, I think, could be riskier.
By the way, I think your posted name “cfa.tor” could constitue a violation of ethics and standards, be careful.