High Yield

Treasury Sells 7Y Paper In Another Mediocre, Tailing Auction; Bond Market Yawns

When the results for the sale of $28bn in 7 paper printed, the result was a modest tail, with a high yield of 1.389% tailing the 1.385% When Issued. As a reminder, last month's 7Y auction had an even bigger tail but that was due to concerns of a potential rate hike by the Fed in September; this time there was no such concern.

Junk-Bond Traders Pile Into Bearish Bets Ahead Of Fed/BoJ

After one the biggest rallies in the last seven years off the Feb lows, high-yield bond investors are rushing into bearish (hedge) positions ahead of this week's Fed/BoJ spectacle. Put volume (protecting downside) in the last few days has soared to levels only seen around Brexit and last December's Fed rate-hike as Bloomberg notes, investors have already become skittish on signs that global central banks may turn off the spigot.

Six Striking Observations About Corporate Debt

"It is usually a bad idea to buy corporate high yield bonds late in an economic upturn. Let me share some facts with you that undermine the perception outlined above..."

Step Aside London Whale: Goldman Is Now Using Retail Deposits To Fund Investments

Goldman has been using the proceeds from the new deposits to directly fund speculative activity such as trading and investments, as well as more conventional activity such as creating looans. Goldman Sachs built up its consumer bank, led by 40-year-old Goldman partner and credit trading veteran Gerald Ouderkirk, whose job is to use consumer deposits and other types of funding for trades, investments and loans.

5 Charts For Fully Invested Bears

“The funny thing is there is a disconnect between what investors are saying and what they are doing. No one thinks all the problems the global financial crisis revealed have been healed. But when you have an equity rally like you’ve seen for the past four or five years, then everybody has had to participate to some extent. What you’ve had are fully invested bears.”

Recovery Rates In E&P Bankruptcies Hit "Catastrophic" Levels: Moody's

Moody's has caught up to what readers of Zero Hedge knew half a year ago. According to the rating agency, creditors of energy exploration and production companies that went bankrupt last year recouped less than half the usual amount for their claims, and 2016 is shaping up just as bad. Moody's even went so far as to even use the "C" word: "Recovery rates for 15 U.S. E&P bankruptcies averaged a “catastrophic” 21 percent last year, well below the historical average of 59 percent."  

"It's Never Different This Time" PIMCO Warns "The Tides Of Risk Will Flow Eventually"

The old Wall Street expression is “They don’t ring a bell at the top.” This snarky adage is usually employed by those saddened financial managers who ride a successful investment to a peak and then watch in horror as it reverses course to a level below their cost basis. A pity this notion is misguided, since the market frequently “rings the bell.” It is just that most market participants are not listening. Perhaps they should be listening now.

"This Is A Big, Big Moment" - Gundlach Warns Yellen May Surprise Markets

In his presentation titled appropriately "Turning Points" (presented below) Gundlach said that “this is a big, big moment," predicting that “interest rates have bottomed. He also said that the Fed "wants to show that they are not guided by the markets" and that "they can’t be replaced by WIRP." A Fed surprise would send rates spiking, and Gundlach warns the 10Y may close 2016 at 2% or higher.

BofA: "Bad News Is Good News Has Played Out", Any More Weak Data "Will Be Met With Market Skepticism"

"We think the 'bad news is good news' theme has mostly played out in the near term, and any additional weak economic data will likely be met with market skepticism. Additionally, payoffs are asymmetrically skewed at the moment, with hawkish commentary or a surprise hike likely being met with a much fiercer selloff compared to additional tightening caused by a continuation of the norm."