Understanding bond spreads, comparing yield of different bond's, is an art as much as it is a science. As an example, it seems to me that the current narrowing of spreads between Treasury debt and credits is saying that the bond market demands higher Treasury yields. That reflects market recognition of the possibility of a US debt crisis/renegotiation at some time in the future, and signaling inflation forces are genuinely lurking nearby. It seems pretty easy to say that. Paul Krugman puts a different perspective on this in a recent post titled "A Note on the Term Spread". In his post he makes this interesting point...