Yield Curve Collapses; High Yield Credit Gets Mauled: Banks Rally

The_Real_Fly's picture

Content originally published at iBankCoin.com


We're not supposed to see BAC higher on a day when spreads are collapsing, but we are nonetheless.

Financials are strong on an otherwise weak day, in spite of high yield getting killed once again. More on that in a minute.

JNK and all of PIMCOs high yield bond funds are getting crushed, some down more than 5% over the past 2 weeks.

Juxtapose that against treasuries and you can clearly see not all bonds are created equal. TLT is rising and hasn't been hit like JNK.

I know this is all very data-dumpish, but bear with me as I attempt to scare you. Volatility is busting loose.

The only thing missing from the puzzle is the sharp rise in the Yen to officially spark worries of a carry trade unwind. What do you think, yen about to break higher or not?

Personally, I'd like to see a rout in NVDA, which is pretty much the poster boy of high valuation tech now, in order to confirm a true break in the market. The fact that banks are strong today suggests there is a bid in this tape, which might lead to a late date rally. Nevertheless, there are still numerous factors to be worried about, especially the breakdown in high yield credit and oil.

The only position I'd consider buying today is long Yen, but I think it's rather redundant for me, considering my other bearish positions.

Top picks: short NVDA, RUSS, DRIP, UVXY for the laughs.