Biggest 3-Day Slump in 3 Months for High-Yield Bond ETF

Tyler Durden's picture


The ever-so-popular high-yield bond ETF, HYG, is suffering its biggest 3-day drop since Thanksgiving as higher beta assets are underperforming and the up-in-quality and up-in-capital-structure trade gathers pace post LTRO 2. Even with last week's ex-divi date, we note that this loss of the last 2-3 days wipes out the yield that was 'reached for' of the last 2-3 months. It seems all too easy to buy high-yield bonds when they are on the rise but underlying that ETF is a portfolio of 'junk' assets - some better and some worse obviously - that are increasingly being driven top-down by the fast-money action in this newfound ETF's liquidity (as dealer inventories dwindle). This leaves them prone to just-as-fast exits as the secondary high yield bond market remains 'illiquid' away from benchmark size and ETF-bound assets providing little underlying 'pricing' evidence of market value. This is the largest underperformance of the high-yield market relative to the equity market since the recent rally began.


The upper pane is HYG's price action and the lower pane shows the percentage change over the last 3 days is the largest since the main rally began on Thanksgiving.

Even adjusted for the dividend drop, the underperformance of HYG and HY (the credit derivative index that tracks high yield bonds) is clear post LTRO2. Investment grade is outperforming as up-in-quality risk aversion starts to creep into asset allocation.

Charts: Bloomberg

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Mon, 03/05/2012 - 16:28 | 2225332 financial apoca...
financial apocalyptic contagion's picture

buy buy buy

Mon, 03/05/2012 - 17:35 | 2225516 Zero Govt
Zero Govt's picture

some sucker has to

'Benny the Squid' is running out of tentacles for all the bags he's carrying of his wonderous Goldilocks economy

Mon, 03/05/2012 - 17:00 | 2225535 The trend is yo...
The trend is your friend's picture


Mon, 03/05/2012 - 16:30 | 2225348 Xibalba
Xibalba's picture

seems like even the hft's aren't trading....

Mon, 03/05/2012 - 17:19 | 2225638 max2205
max2205's picture

they are having SFT fun after hours....cock suckers....

Mon, 03/05/2012 - 16:31 | 2225356 apu123
apu123's picture

Yeah, but the Dow is about to go green!  Risk on! 

Mon, 03/05/2012 - 16:36 | 2225381 Flakmeister
Flakmeister's picture

A old saw about rats and a sinking ship come to mind....

Mon, 03/05/2012 - 16:38 | 2225396 SheepDog-One
SheepDog-One's picture

Gee as long as stocks are ok, all is well! Has to be!

Mon, 03/05/2012 - 17:09 | 2225582 Sudden Debt
Sudden Debt's picture

Govs are buying stocks now remember?

Mon, 03/05/2012 - 19:29 | 2225885 Zero Govt
Zero Govt's picture

Not sure they are, not sure anybody is.. have you seen the volume, have you seen the actual $money invested? ..we're at minus -$400bn Net Outflow and counting, stocks are running on fumes (cough, splutter, wheeze)

Mon, 03/05/2012 - 16:51 | 2225468 apu123
apu123's picture

Pisani was on CNBC telling everybody not to forget that we are in the midst of great economic date and EU news. Pisani said that the US was doing great, China slowing down was no big deal and the Europeans have whipped their economic crisis and the recession will be shallow and short lived due to ECB efforts.

So according to Pisani everything is ok.  As Brennen Huff so aptly said about Dale Doback "What a doucher."

Mon, 03/05/2012 - 17:16 | 2225623 Piranhanoia
Piranhanoia's picture

Can watch CNBS all day long and not get as much info as you can on this site reading for 40 minutes.  

And for those of you that don't realize it,  television sound is designed to cause salivation, and used to control the audience reaction.  Has been for a long time. Getting someone to start istening to propaganda (instead of it being force fed)  is the first step to their believing it, and believing means you skipped all the learning necessary to make your own decisions.    


Mon, 03/05/2012 - 17:00 | 2225539 jcaz
jcaz's picture

Bonds never lie......

Mon, 03/05/2012 - 17:08 | 2225579 Sudden Debt
Sudden Debt's picture

So do we expect logics to enter the maket?....



Mon, 03/05/2012 - 17:20 | 2225620 MFL8240
MFL8240's picture

This was one of the number one invetment recomendations for 2012 for the sheep compliments of JP Morgan.

Mon, 03/05/2012 - 17:41 | 2225751 CoMooter
CoMooter's picture

Pisani makes Becky look brilliant...

Tue, 03/06/2012 - 01:59 | 2227104 fellatio is not...
fellatio is not fattening's picture

I have to question the headline, and here is why, I am long 32 individual hi yield names, have been for ~18-24 months, the actual last or bid is posted each a.m. and so far my total portfolio principle is down less than 2% since 2/29, most are BBB or higher

Tue, 03/06/2012 - 01:59 | 2227108 cnhedge
Wed, 04/11/2012 - 18:07 | 2336126 MFL8240
MFL8240's picture

Obamas recovery is in full throttle!

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