In today's column I look at bonds, a potential breakdown and a return to sanity in the corporate bond market. What I mean by that last part is that corporates have gone a different way than Treasuries, which is odd since corporates are usually priced off Treasuries, adding a little risk premium in the form of higher yield.
Apparently, the market thinks the gubmint is a riskier proposition than even a junk bond. Are you listening Mr. Treasury Secretary? Congress? (both sides)?
Rates are going up. It is just a matter of when and I mean that on the scale of weeks, not months.
Will be on the road this week so posts here will be infrequent. Happy Holidays to all!
1 comment:
Hey Mike,
I've actually been watching the iBoxx High Yield etf, or HYG as part as kind of an animal spirits gauge, which is more speculative than the LQD. I think you can make a pretty decent case that it's topped.
I prepared a chart in Google docs:
https://docs.google.com/leaf?id=0B-eRctSn-7nNZDM3ZmQ2N2ItMTczNy00MDRlLTlkNmQtYmIwYzg2MzZmODRm&sort=name&layout=list&num=50
It looks like a counter trend ABC rise complete with ending diagonal following a 5 wave decline from the top in 2007. The declining momentum supports that a C wave was completed rather than a 3rd wave. Notice too how it stops almost on a dime at the 61.8% retracement level. If you drill down to intra-day periods the waves aren't as clear, but the decline from the January high looks much more impulsive than the rise since the February low. At least that the way I see it... Like you said... bonds tend to lead the stock market... going down?
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