It is the month of Jan, Feb and March when CD issuances rise manifold. Corporates demand funds from banks for working capital requirement. Corporates also buy funds for plant and machinery to enjoy depreciation benefit. Hence banks fall short of money and raise funds via bulk deposit at higher rates amid tight liquidity for funds. Short term rates rises so it is well understood that banks won’t borrow funds at 8.5-9.5% to invest in bonds yielding nearly same return. This reduces demand for corporate bonds and hence spread widens substantially. Soon as and when liquidity improves (which brings down short term rates as well) spread narrows.
More about Kush Sonigara on Google+