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Credit And Equity Continue To Be Bipolar Opposites

Submitted by Tyler Durden on 03/12/2012 13:54 -0400

Since the Greek PSI deal was announced early on Friday morning, European credit markets have been underperforming European equity markets quite materially. Friday in the US held up in a narrow range for a short-period but once we discovered that the CAC was in fact a credit event thanks to ISDA, the US credit market deteriorated rapidly and remains weak as US equity indices are holding stable. We wonder, with CBs seemingly on the sidelines for now and fall-out from the Greek deal remaining uncertain, whether credit is once again reflecting market angst more efficiently than the marginal robot in equity markets.

European Equity vs Credit...

US Equity vs Credit...

Notice that in the US, the IG index (which is investment grade credit spread based) is outperforming high yield (HY). We suspect this outperformance contonues to be an up-in-quyality rotation that we have been discussing for some time (and the cheapness of the HY-IG decompression RV trade). Furthermore, the IG index does not contain any of the major financials in the US (unlike the European index) - which is where most of the underperformance has been recently.

Charts: Bloomberg

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Mon, 03/12/2012 - 14:03 | 2247808 Tao 4 the Show

Alas, equities are not credible and credit is distributed with inequity.

Mon, 03/12/2012 - 14:07 | 2247824 LawsofPhysics

precisely why we all need to get physical. Something is going to give, and not in the immediate large "boom" sort of way everyone is expecting.

Mon, 03/12/2012 - 14:16 | 2247860 SheepDog-One

Get physical metals, and dont forget the steel copper and lead kinds either.

Mon, 03/12/2012 - 14:06 | 2247821 The Axe

Maybe equity voulme is fucking 9% lower then the lowest volume day this year....ha ha No one left to sell, just a broken market...

Mon, 03/12/2012 - 14:20 | 2247874 SheepDog-One

Yea and also means no one left to sell to either. The casino may be large, but the exit is one of those dog door things now.

Mon, 03/12/2012 - 14:06 | 2247823 DaveyJones

the current concepts of credit and equity are not bipolar opposites, they're just bipolar

Mon, 03/12/2012 - 14:15 | 2247858 kito

youre one of those highly intelligent geniuses, huh???............

Mon, 03/12/2012 - 14:08 | 2247831 Dr. Engali

Joe six pack doesn't look at credit. As long as up the stock market is up all is right with the world.

Mon, 03/12/2012 - 14:12 | 2247844 kito

spot on.....i was so happy to see the dow green today....like spring come early............all is well in the world..........la laaaa laaa laa la laaaaaaahhhhhhh................

Mon, 03/12/2012 - 14:20 | 2247877 Tsar Pointless

Yep.

It's going to be near 70 degrees much of the week here in Western Pennsylvania, a good 20 above normal. The little children disguised as adults are absolutely giddy. And the Dow is near 13,000 still. And March Madness is beginning. And Spring Training is in full-swing.

All is well in the Land of Make Believe. Unicorns and rainbow skittles for everybody!

Mon, 03/12/2012 - 15:19 | 2248100 Clueless Economist

Yes, but sadly, the Pirates still suck

Mon, 03/12/2012 - 14:17 | 2247865 SheepDog-One

Poor ol Joe Six Pack, now reduced to a single 24 oz malt liker daily.

Well as long as HE thinks its all good....then thats all that matters surely.

Mon, 03/12/2012 - 14:29 | 2247914 DaveyJones

pretty soon it'll be government vodka

Mon, 03/12/2012 - 14:16 | 2247861 dontgoforit

...and on another note: The DOJ ruled against Texas on having a picture ID when trying to vote:

Using Census data, the Justice Department argued that the law creates an undue hardship on Hispanic populations that don't have the means to get a vehicle, live extremely far from a driver's license office or can't make it during the offices' limited operating hours

It's an undue hardship for them to go get a picture ID (because they're illegal aliens), but you can bet they'll be able to make it to the poll and vote for the bozo's that allow all US law to be rebuked. I suppose BHO will have the buses running non-stop to Nuevo Laredo and back and from county to county to steal the election yet again. Won't even miss ACORN this time...

Mon, 03/12/2012 - 14:20 | 2247873 TradingJoe

some type of "journalist" in that area ought to expose this issue, eh?!

Mon, 03/12/2012 - 14:17 | 2247866 devo

CBs seemingly on the sidelines for now

Wait...what??

Mon, 03/12/2012 - 14:18 | 2247870 SheepDog-One

Must mean that CB's are controling it from the sidelines with some kind of remote control devices. I dont know.

Mon, 03/12/2012 - 14:21 | 2247881 TradingJoe

Rumors...ahm...carrots...ahm...HilsenRattenSchwantz...ahm...gees I don't know :()

Mon, 03/12/2012 - 14:22 | 2247885 Tsar Pointless

I haven't used a CB in, oh, 25 years or so.

I loved those things. I never used one on the sidelines, though. Walkie-talkies, yes, but no CBs.

Mon, 03/12/2012 - 14:20 | 2247876 Village Smithy

The ECB intervention in the Greek bond deal has to have awakened at least a few bond holders to the fact that what they think they hold and what they actually hold when the SHTF, may be materially different. By fucking with Greek bonds they have tainted, at least to some degree, all bonds.

Mon, 03/12/2012 - 14:28 | 2247905 espirit