Corporate Bonds and Prospective Stock Returns By Howard Simons About this article: The bad news about good news is that it is less all-encompassing than we might hope. We saw last week how narrower TED spreads and other measures of short-term credit did not have the desired upward effect on stock prices. Will the same hold true for a decline in realized corporate borrowing costs, the sum of government bond yields and corporate credit spreads? The answer, unfortunately for those who view the world through the prism of stock index levels, may be "yes." Let's update an analysis from last May and add European realized borrowing costs to the mix. In both the American and European cases, realized corporate borrowing costs, especially for lower-quality borrowers, have a huge amount of room to decline. However, they must decline by a very substantial amount to re-enter a zone where prospective stock market returns become positive. Let's map three variables for both American... Or, call us at 1-866-321-TSCM (8726) Monday-Friday, 8 a.m.-6 p.m. ET. Outside the U.S. and in Canada, call 1-212-321-5200. More Stories From RealMoney Durable Goods Up Move Down the Tech Food Chain Jobless Claims Still High Bulls' Tenacity Is the Big Question Mark Should You Buy It? Pharmaceutical Product Development Bad News Trumps All Support for Banks Holds, For Now Bummer, Yields Are on the Rise Money on the Line Makes a Big Difference Structured Products: Unsafe at Any Price MORE STORIES FROM REALMONEY

If you choose a 14-day free trial of RealMoney and you do NOT call to cancel within those 14 days, you will pay $129.95 — a $100 savings off the regular annual subscription price of $229.95. Unless you cancel before the end of that year, your subscription will automatically renew for another year at the then-current subscription price.

Offer applies only to new annual subscriptions, and is subject to change at any time. Void where prohibited.

If you choose a monthly subscription, you pay $34.95 per month. You will be notified if the current monthly rate of $34.95 changes at any time in the future.

TheStreet.com is a publisher. None of the contributors or their affiliates will provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. From time to time, any or all of the contributors or their affiliates may hold positions in securities mentioned and they may trade for their own accounts. In cases where the position is held at the time of publication, appropriate disclosure is made.

© TheStreet.com, Inc., 14 Wall Street, 15th Floor, New York, NY 10005.