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"It's An Epic Bloodbath" - Presenting The 2015 Junk Bond Heatmap
Ten days ago, before the world had heard about the stunning liquidation and gating of the Third Avenue Focused Credit Fund, we asked one question: Did Something Blow Up in Junk, with our question driven by the relentless collapse in triple hook-rated (CCC or below) bond prices, or alternatively, their soaring yields.
A few days later we learned that the answer to our question was a resounding yes, when first Third Avenue and then Stone Lion Capital (run by two ex-Bear Stearns distressed trading heads) gated investors following what may have been a dedicated attack on the worst and most illiquid junk bonds, but was really just a marketwide puke in junk starting at the bottom and spreading to the top.
Since then things for the junk space have gone from bad to worse, and as of Friday, the effective yield on the BofA-Merrill universe of bonds rated CCC and below has soared to 17.24%, taking out the 2011 wides and trading at levels not seen since the summer of 2009... only in the wrong direction.
And yet, in a world where everyone has become an algo and thinks of performance in heatmap terms, the chart above (which we will show shortly from a far more stunning angle) hardly does justice to the absolutely bloodbath in the junk bond space.
So, without further ado, here is a visualization of the change in junk bond prices since January 1, 2015. For those confused, the redder the worse. It is, for lack of a better word, an epic bloodbath, and perhaps the only question after looking at this is how have many more credit funds not gated yet.
And yes, if one looks hard enough, there are a few junk bonds which actually are green for the year. See if you can spot them.
Source: Citi
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the effective yield on the BofA-Merrill universe of bonds rated CCC and below has soared to 17.24%,
Wake me up when the yield crosses 25% which it will. Manipulating markets higher and oil lower can have unforeseen consequences.
Maybe Old Yeller can start buying junk bonds
The "red map" is a pre-screening for Treasusries after December 16th, 2015.
Fantastic article, pithy and to the point.
Well done, Tylers!
For those confused, the redder the worse.
Good to know...
The Heat is ON.
The heat is on, on the street
Inside your head, on every beat
And the beat's so loud, deep inside
The pressure's high, just to stay alive
'Cause the heat is on
Looks like a Predator heatmap for wallstreet's primed vultures.
But..but.. PROMISE ZONES!
(Does anyone remember that.)
Yup... My old company is under Insurance...
Rob Kirby's warning the END GAME is underway, and that we have 4-5 months left...
I wonder what will happen to Disney stock when "Star Wars: The Force Awakens" turns out to be a critical disaster, a joke with bad acting and worse writing. An "Ishtar" in outer space. After the initial tsunami of fans flood the movie complexes showing "Star Wars 7", we will see how deep a hole Disney dug buying the "Star Wars" franchise. At first, everyone will say the movie was great, not wanting to upset the applecart. Eventually, the truth will out and heads will roll at Disney.
sheeple aren't that discerning when it comes to their Disney fixes. They will lap that shit up as bad as it will probably be. (No argument there). And don't forget the theme park tie-ins. I swear Disneyland is never not crowded to max capacity. Disney knows what they're doing. The quality matters some but not that much.
Force Awakens is good as any other major rave for these times. The streets will be awash in fandom through the new year in Hollywood. Hope for the best.
"Rob Kirby's warning" - this is a GREAT INTERVIEW, really dire and sincere
It's lasted longer than I expected, but the big banks and market houses having been propping them up. Now though, the hedgies are starting to eat it, and are running for the life boats. This is going to suck up lots of liquidity that can't be quickly replaced and will knock on to stocks like a bowling ball going down the alley......
… Yeah, you could feel the turmoil & stress building all year long -- the worse things have gotten, the harder everyone smiles & lies… (journalists & Feds included!)
(journalists & Feds included!)
Especially......
Looks like a Yellen Tartan plaid to me.
Hike that Kilt, Mr. Yellen, and watch everyone faint.
Oooo..... Thanx for putting THOSE thoughts in my head.
( Damn you man. Damn you to hell. )
http://kbjackson.com/wp-content/uploads/2013/09/image69.jpg
So is black really red or is it just a dark green?
The fed will ABSOLUTELY start buying junk.
Blaming poor liquidity and promises to self-liquidate when prevailing market conditions improve.
Or they will just buy stealthily, like the futures manipulation.
Time to audit and end the fed.
If they do QE4, I'm starting a class action lawsuit for taking my puts out to pasture.
They're gonna need a bigger junk drawer.
"Junk" is (and always has been) the right name for these investments.
Beware of new names for this in the future, "high-yield" has already been outed...
Hm... Alternate yield bonds, Freestyle holdings bonds, Alibaba and the forty associates bonds...
Happy days are here again...
… I just LOVE Fonzie !!
Well as far as 'junk' goes, Kim Kardashian's ass could stand for a little reducin'
Kim Kardashian's ass could stand for a little reducin'
Your wish is granted:
https://youtu.be/EuQLMXyGQOE?t=1m34s
It's not so bad, I can still recognize a finger and an ear in that crime scene. *snicker*
It's only a $2T market. Bernanke's bitch Yellen can print that in a couple of days
junk bonds are treated just like a momo stocks as are currencies and every other financial "product".
do you see what happens larry?
What the heat map doesn't show is the tower of derivatives that depends on this "foundation" of debt-without-collateral. Things are about to get even epic-er.
...and oh, by the way, gold is the good-est of the rare good collateral.
Yep, physical gold.
* * *
"There is always someone around who will take your gold."
I read that quotation (or very similar) here at ZH a long time ago. That was meant that there are enough people around who recognize the value of gold that they will exchange gold you own for something else you may need.
If we think we have a problem with the kicking of the Islamic hornet's nest, just wait until we have a horde of broke ass financialists (gamblers) circling around our heads. As we have seen in with the lower entitled class, nobody is more pissed off and destructive than those who have lost their "something for nothing".
Good point. I hadn't equated the bankers entitlist attitude with the immigrants, but the comparison is fair.
CUE THE RALLY MONKEY!!!!!!!!!!!!!
Just wait until MBS crash. ;-)
Now I know the cause of Global Warming. THE HEAT MAP.
I don't have pity for people in casino's business..
Ah, The bed of coals that roasts the greedy little monkeys.
Young people should all default on their student loans. It's sad their all getting screwed on their taxes and interest if they paid.
The final fix is for all debts to default. A debt jubilee would be more controled, but fiat money came from nothing, and one way or another will return to nothing. Until then we are debt slaves.
It could have been better if donkeys were running the country.... all the s###t would have stayed only in the White House.
Goddamn! Whose bloody maxipad did tyler post as a heat map?
Cant be Yellen's. Shes in menopause.
" Please, do not worry. "
Perhaps an idiot question:
What does "gated" mean, exactly?
No exit. You can leave but your money stays behind.
Raise the rates ole Yeller!! I dare you !!
I wonder if the financieers have created SBCDOS's yet, or Shed Backed Collateralized Debt Obligation Swaps.
That's for all those Rent-to-Own sheds I've seen being hawked on roadsides in several locations. I guess when the average person doesn't have enough saved for a shed they have to make payments on 'em.
No idea how the debt security 'owners' plan on repossessing that "collateral" should anyone (er, everyone in this case) living month-to-month making shed payments all of a sudden decides, or has to, default.
You can slap your SBCDOS's right next to your CDS's, MBS's and ABS's for a nice diversified portfolio, rolling your dice on the fortunes of already broke mother fuckers and hoping they still give a damn about their "credit scores".
Just restructure it a little so they have 100 years to pay back instead of 10, problem solved let's give out more loans
Why doesnt this crash, in CCC bonds, tell us that BBb bonds in the future will also come under fire? If you think about it, the rating agency doing their ratings are corrupt. So maybe a lot of BBB's are really bb and CCC =)
see the areas doing well, leaisure , services, IT, anything to so with industry totally fucked. oh unless military equipment aint classed as junk bonds material
Yeah, poor grandpa will curse his money manager, for not returning his principle, blame his lack of a social security COLA on George Bush, throw a brick at his television when Trump appears, and make the whole family miserable with his anti republican rants during Christmas dinner.....
Looks like the inside of Obammy's rectum. Except for the missing jizz.