Look! A ‘Junk Stock VIX’
Looking for a new leading indicator? Here’s one candidate.
Looking for a new leading indicator? Here’s one candidate.
But remember, at some point people will start selling the underlying and that’s when shit gets really messy, especially if that selling ends up being prompted by massive outflows from the ETFs whose holders have no conception whatsoever of the underlying liquidity mismatch.Â
Just how nervous did folks get during the junk bond rout that finally took a breather when spreads tightened materially on Thursday?
I’m not entirely sure what to make of the commentary on this. There’s no “right” way to write about it. It’s almost a “see no evil, hear no evil, speak no evil,” type of deal.Â
“This is the big one, Elizabeth!”
“So maybe it’s not so much that equities are out of synch with high yield, as much as it is”…
Well, if you’re in risk assets – or short vol. – you probably feel like the world is conspiring against you on Thursday.
“It has been too long. Way too long by the standards of its predecessors, and yet this credit cycle still shows few signs of an impending turn.”
Dispersion is the trend.
All kinds of people are suddenly talking about the bubble in high yield. Of course
“The “lust for return†is alive and kicking.”
“Equity investors are paying attention”…
“The implication is that high yield credit could be 30%+ mispriced as and when volatility moves back to average.”
“There was no immediate catalyst for junk bonds to lose shine, as the VIX was close to multi-year lows and stocks were setting new highs amid steady rise in oil prices.”
Of course if you’re determined to stay bullish…
“In our view, the bar remains high for oil prices to become the main directional driver of HY spreads but the risk has risen.”
Now “the high-yield bond market is waking up,” he went on to caution.
So Goldman has something new out on Tuesday about ISM peaks and what generally happens
In other words, they’re around when you don’t need them and not so much when you do…
“Moving over the small hump of the French election and back to 2014 we go.”
Just call it a “flight to (relative) safety”…
…just something else you can probably ignore if you’re in junk bonds.
“That’s it. It’s over. The HY bubble has burst.”
A persistent theme in these pages is the extent to which the mammoth spread compression
Wonder no more…
On Wednesday we showed you the following chart from BofAML: So that right there should
Over the past two months, we’ve warned repeatedly that global asset prices may be set
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