This page has been archived and commenting is disabled.

S&P Gives Up Gains As High-Yield Bonds Break Bad Again

Submitted by Tyler Durden on 12/21/2015 12:37 -0400

Following a brief dead-cat-bounce into The Fed's policy error, high-yield bonds are once again being sold for the 3rd day in a row, filling the gap-up from last week. This reality - among others - is weighing on US equities as The S&P just gave up all its Monday morning "stocks are up and they should be" gains.

Credit crashing again...

And stocks not happy...

Who could have seen that coming?

- advertisements -

Mon, 12/21/2015 - 12:39 | 6949219 mtndds

If that long dated bonds takes a turd then I guess the FEDERAL RESERVE screwed up on that rate hike.

Mon, 12/21/2015 - 12:43 | 6949241 i_call_you_my_base

Don't get suckered in on the narrative. It shouldn't be that all decisions that make the market drop are an "error".

Mon, 12/21/2015 - 12:45 | 6949254 order66

HY implosion + $34 oil + rate hike should eventually be the shutoff valve for buybacks as debt contagion spreads.

Mon, 12/21/2015 - 12:54 | 6949310 asteroids

So much for the Santa Claus rally....

Mon, 12/21/2015 - 13:00 | 6949348 froze25

Long USD, short Yen, Long Municipal bonds A rated or better.

Mon, 12/21/2015 - 12:43 | 6949242 knukles

Long treasuries will be rallying if they screwed up ... which they did and are and will...
Our Equity Brethren (Cramer, et al) are not paying attention to their best leading indicator of trouble, widening spreads on High Yield.
But WTF, can't ever tell any equity manger anything.

Mon, 12/21/2015 - 12:49 | 6949277 KnuckleDragger-X

It doesn't matter, they'll be firing the magic money machine up over at the Fed come January because that always fixes everything.....

Mon, 12/21/2015 - 13:05 | 6949377 vq1

Prior to the recent Great Recession, there had been six recessions since 1969, and over those episodes, on average 13.3 months passed from the time the recession ended to when the Fed felt confident enough in the recovery to raise rates. (The lag time was just 3.5 months in the four recessions between 1971 and 1991). (The National Bureau of Economic Research, US Business Cycle Expansions and Contractions, 4/23/12)

But after the recession of 2008 - 2009, the Fed waited a staggering 78 months to tighten the monetary levers. Those prior tightening cycles also occurred at times when GDP was much higher than it is today. Over the prior six occasions GDP, in the quarter when the Fed moved, averaged a robust 5.3%. While the current quarterly GDP is still unknown, the data suggests that we will get a figure between 1% and 2% annualized. (Bureau of Economic Analysis)

-peter schiff

"In many cases, Bear Market Stage 7 occurs after a major “dead cat” bounce – a temporary yetimpressive rally off the lows of the first major sell-off of a new downtrend. The second sell-off, which occurs after the dead cat bounce, can bring the panic of Stage 7 if it is severe enough.

As can be seen on the chart, the S&P 500 has already experienced one major sell-off in the past few months. It has also experienced a major rally (possibly a dead cat bounce). Therefore, the next major dip has the potential to be the start of Bear Market Stage 7."

http://www.zentrader.ca/blog/a-primer-on-bear-market-stage-7/

Stocks close bright green this week, merry christmas. January, Feburary- "look out below"

Mon, 12/21/2015 - 12:49 | 6949281 Tinky

You picked the right week to transpose "manger" and "manager"!

Mon, 12/21/2015 - 12:41 | 6949232 buzzsaw99

i ben spoofed /s

Mon, 12/21/2015 - 12:45 | 6949249 NoDebt

You know it's getting bad when the pre-market pump can't even hold the market green to the European close any more.

Stay the hell outta this market until QE4 is announced. And it better be twice the size of the last one.

Mon, 12/21/2015 - 12:50 | 6949287 KnuckleDragger-X

Only twice????

Mon, 12/21/2015 - 12:55 | 6949316 NoDebt

We wouldn't want to panic anyone by saying it's 10 times the size. That might be seen as desperation. And clearly there's no desperation going on at the Fed.

Mon, 12/21/2015 - 13:52 | 6949581 KnuckleDragger-X

The Fed is a doomsday cult, so things are going well......

Mon, 12/21/2015 - 12:54 | 6949261 Soul Glow

Let's have some faith in the Fed here. Janet hasn't even begun to sell her book yet. When she does, that will be bullish, because she said so.

So just wait until she puts $!T worth of toxic bnds on the market. All will be well then.

Mon, 12/21/2015 - 12:47 | 6949266 Consuelo

How much of the S&P (and Treasuries) can Fed proxies $buy, and how long can that chicanery persist...? Does not the entire house-of-cards now rest on this dynamic...?

Mon, 12/21/2015 - 12:51 | 6949295 Tinky

1) a lot

2) not as long as many hope or imagine

3) nah – the house of cards is already coming down

Mon, 12/21/2015 - 13:20 | 6949427 herkomilchen

1) sky's the limit

2) possibly decades. See Japan

3) yes and will continue to as long as people use the dollar

Mon, 12/21/2015 - 17:04 | 6950432 Tinky

I find it remarkable that anyone could confuse Japan in the 1980s with the U.S. today.

(pro-tip: when comparing anything, context is crucial)

Mon, 12/21/2015 - 12:57 | 6949270 two hoots

What is/was the Fed standing on as it holds up the world? Maybe a question for wbanzai7 to answer?

Mon, 12/21/2015 - 12:51 | 6949292 Dr. Engali

High yield is going back to 2009 levels where everything should have been left to go. Seven fucking years of manipulation, trillions wasted just to wind up where we should have been in the first place. Well, at least the bankers got paid.

"I had to forget free market priciples to save the free market".

G.W. Bush

Mon, 12/21/2015 - 13:00 | 6949345 NoDebt

JNK (my chosen HY vehicle at the time) hit a low of about 26 or so in the depths of 2009. That's visible from here. At the time that equaled yields of about 18-20% or so, and was probably the best long term trade I ever did.

Here's the difference this time. Even if JNK goes to 26 again the yield is still not going to get to 18%. The price could go even lower.

Mon, 12/21/2015 - 13:07 | 6949381 vq1

Hope you know some bankers to invite you to this years holiday party. damn this year was good!

Mon, 12/21/2015 - 12:54 | 6949312 E.F. Mutton

So how much did this morning's "rally" cost the FED PPT?

Mon, 12/21/2015 - 13:02 | 6949358 Soul Glow

You mean the taxpayer.

Mon, 12/21/2015 - 13:16 | 6949410 herkomilchen

And the currency holder.

Mon, 12/21/2015 - 13:59 | 6949611 ParkAveFlasher

You don't "hold" currency, you rent it.

You don't "pay" taxes, you submit them.

Mon, 12/21/2015 - 12:58 | 6949334 conraddobler

The credit cycle SHOULD BE OBVIOUS to someone who runs an empire based on credit AKA DEBT.

The first whiffs of foul stench always come from the front lines of credit worthiness then the full rot is often not far behind. Those who are charged with knowing these things of course know them but don't acknowledge them because they would prefer to continue with the charade of hiking rates which is designed to prick the bubble or to give the illusion all is well or give the illusion that they didn't see this comming or all of this.

It's in actuality ludicrious that NOW of all times they'd chose to hike rates as if all this time before they were just unsure but NOW they are sure they must act.

This is freaking ridiculous and insulting.

Maybe they keep pouring on the QE or maybe now is the time to pull the plug and let the banks feast on the carcasses that will be created by this.

It's frankly beyond the pale their arrogance is showing.

Maybe the jig is up and they just want to start distancing themselves from the collapse?

Frankly this is eerie at best.

Mon, 12/21/2015 - 13:00 | 6949351 Miss Expectations

That dead cat looks like he was electrocuted. That's what you get when you use a large defibulator on a cat:

http://www.elec-intro.com/EX/05-15-22/ii_defibrillator.gif

Mon, 12/21/2015 - 13:15 | 6949405 Truth Eater

People have been numbed (read that: dumbed down) by the Plunge Protection Team pumping the stocks at any hint of a drop. Retirement fund "counselors" still use the age old BS of cost averaging and stay the course because the long term result will be increased stock values. They are lying to fools who trust the "financial experts".

As more wake up and pull their holdings into cash, we will see the federal reserve/SEC/Treasury PPT unable to stop the hemorrhage of money, as equities and bonds go on sale.

The bubbles have been bullging too long. Something had to prick them. This little rate hike thing is just dust on the head of a pin.

Mon, 12/21/2015 - 13:30 | 6949471 tumblemore