He warns that whatever the reason, this behaviour has created distortions in bond markets that are difficult to understand.
“At present the yield, including the additional spread for lending to European high-yield (sometimes called junk bonds) companies for five years, is less than that available for lending to the US government for five years,” Mr Yeates adds.
The interest rate environment also has an impact on spreads and where they are likely to go from here.
The recent appointment of Jerome Powell as chairman of the Federal Reserve, replacing Janet Yellen at the US central bank, has led many economists and analysts to believe the pace of rate hikes will increase this year to around four.
The latest economic data to come out of the US so far seems to support this.
The number of jobs added to the US economy in February was 313,000 – approximately 100,000 more than predicted.
But wage growth came down slightly in the month, to 2.6 per cent from 2.8 per cent and the unemployment rate remained flat at 4 per cent.
As a result, at its meeting on 21 March the Federal Reserve hiked interest rates from 1.5 per cent to 1.75 per cent.
Nancy Curtin, chief investment officer at Close Brothers Asset Management, confirms she still expects to see possibly another three to four interest rate hikes this year from the Fed.
"It was a fairly straightforward decision for [Jerome] Powell to take action and raise interest rates," she says.
"The US economy seems to be in somewhat of a sweet spot, with a synchronised global economy, a weaker dollar, fiscal expansion and the prospect of increased business investment all supportive of growth.
"Wholesale tax reform should filter through more strongly into the economic data ahead, providing increased growth momentum. At the same time, inflation is showing signs of getting close to the Fed’s goal, and spare capacity in the labour market is declining.
“Mr Powell clearly sees this combination of a tighter labour market and ample supports to growth as reasons to embark on steady interest rate normalisation this year.
"He will be sensitive to signs of overheating and will keep a watchful eye on wage increases from here as a signal to tighten even further than the three to four times now expected by the market."
Rate risk
Interest rate risk is highly topical, confirms Hannah Strasser, managing director at Sky Harbor Capital Management, with the Fed on a clear path of rate hikes.
