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High Yield Getting Reacquainted With Gravity
HY 12 doesn't believe in this rangebound mumbojumbo - credit traders have to really earn their living. Speaking of, when will "liquidity providers" also get involved in this product and start trading amongst themselves.
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Valhalla, I am coming! I am your overlord...
It's Bret Farve.
Go chat somewhere else. Save your comments for the article.
TD too many comments are irrelevant.
You shouldn't give them ideas...
Seriously, if the correlations to stocks stay reasonably tight, the ETFs for junk bonds may provide a nice un-plunge protected leading projection of what the next couple of months have in store. I'm thinking that bond traders will get out of Dodge faster than stock jockeys, no?
I think they're going to have a tough time getting out fast without crushing the market. From what I've read the secondary markets for both junk and investment grade corporate bonds have remained pretty illiquid with large bid-ask spreads. Hence the high level of participation in new issues at lousy spreads to treasuries; it's the only way the bond fund managers can put the flood of new money into their funds to work.
To cite one example of the recent strength in the new issue market, a couple of weeks ago Coca-Cola Enterprises, rated A despite total debt about 12-14X its annual free cash flow, floated a 10 year bond at only 90 basis points over treasuries. Last October 29 they had to pay 468 BP over treasuries for a 5 year note.