The US corporate high yield market remains incredibly resilient in the face of increasing global volatility. Year to date the broad HY index has outperformed the S&P500 by over 4.25%.SPY = SPDR S&P 500 ETF; JNK = SPDR Barclays High Yi…
Per earlier post (see discussion and chart), corporate spreads in the US are grinding lower – with new post-recession lows for both IG and HY spreads. The Merrill HY Index spread is now below 400bp and the investment grade equivalent is below 130b…
While everyone talks about the “great rotation” from bonds to equities, we’ve had a different type of rotation taking place within the US fixed income universe – the rotation from treasuries into credit. Here is a simple comparison of total returns bet…
Here is further evidence that in this environment treasuries are driving “risk asset” valuations. Corporate HY bond spreads are now positively correlated to treasury yields. That’s quite unusual because traditionally when treasury yields shrink, spread…
US fixed income investors love their BDCs (see description). Given what’s transpired in global fixed income markets, the overall BDC performance has been spectacular. Here is how BDCs did vs. HY bonds for example.Source: Ycharts (blue = BDC index, oran…
A $100 invested into the S&P500 portfolio right before the financial crisis and held through today would certainly outperform $100 invested into junk bonds, right? Wrong. The chart below shows the returns of two major HY ETFs (blue and orange) and …
Here are the latest estimates of performance across the various fixed income markets over the past month.1-month total return (including interest income)High yield corporate bonds have been the best performer in this near-panic unwind. The reasons incl…
Since the financial crisis, the correlation between treasuries and many credit assets such as high yield bonds (HY) has been strongly negative. With rates at extraordinarily low levels, HY price movements were driven mostly by spreads. When treasuries …
As Merrill’s junk bond index yield crossed the historical low of 5% on Thursday, some senior Fed officials are clearly becoming uneasy. Corporate credit markets are entering bubble territory (see discussion) and up until recently very little has been s…
With investor demand for leveraged loans remaining strong (see discussion), one structural component has not changed. The majority of new leveraged loans still have a LIBOR floor. That means these loans will pay a minimum coupon plus spread, no matter …