• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

The Scariest Chart For High Yield Bond Holders

Tyler Durden's picture


We have been pointing to the 'changes' that are evident in the high yield credit market (bonds, credit derivatives, and ETFs) for a few weeks now. The fall in the high-yield bond advance-decline line (and up-in-quality rotation); the decompression of HY credit spreads; and the lack of share creation, discount to NAV, and underperformance of JNK/HYG; but these canaries-in-the-coalmine pale in comparison to the massively over-crowded nature of the high-yield credit protection bullish positioning among arguably levered market participants. As Morgan Stanley notes: "US High Yield Investors Are 'Full Overweight'". Remember large crowds and small doors are no fun.


The only reason to be this long HY right now (with leverage rising, cash/debt falling, and potentially the liquidity spigot of central banking running dry) is if it is paired against an S&P 500 short as that is the only other high-beta asset class that remains absolutely ebullient.


The primary HY market remains active (especially for European issuers) but concessions are dropping and yields becoming less and less attractive even to yield-hungry carry-chasers (unless they can basis-trade it away).


The other item of note with primary issuance is a preference for quality junk - as opposed to junk junk - i.e. we want some yield but don't wanna buy the next Kodak.

However, if this volume of net longs ever gets itchy feet then the contagion to an already illiquid cash market will be spectacular.

Caveat Emptor.

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Wed, 04/11/2012 - 17:06 | 2335941 dannyboy
dannyboy's picture

Fun Fun for everyone!.... Right?

Wed, 04/11/2012 - 17:12 | 2335958 MillionDollarBonus_
MillionDollarBonus_'s picture

I must admit that I am heavily overweight high yield debt myself. The Greek restructuring turned out to be shining success, despite the whining of doomer libertarians, and this bodes well for the rest of Europe and the global economy. The solid and steady global recovery is also showing increasingly many green shoots which I find very encouraging. In my opinion, this is definitely a time to be buying risk assets.

Wed, 04/11/2012 - 17:21 | 2335989 MeelionDollerBogus
MeelionDollerBogus's picture

bitch, PLEEZ

You weren't even first on this one. I totally pwned it.

Wed, 04/11/2012 - 17:24 | 2335996 slaughterer
slaughterer's picture

Dude, he is the original MDB.  Respect.  He is a legend here.  

Wed, 04/11/2012 - 17:50 | 2336059 nope-1004
nope-1004's picture

Aside from accuracy, of course.  He's allowed to continue to post bullshit - he's been Grandfathered in.  LOL.

Sunday to Tuesday he's Max Fischer, "Clitoris Monday".  Wednesday to Saturday he's MDB, the original "legend".


Before that he shorted Silver at $27 because "it costs only $5 to get it out of the ground".  The shining success bit him hard, so now it's personal.


Wed, 04/11/2012 - 17:52 | 2336082 The Alarmist
The Alarmist's picture

Where was all this deference when Leo was extolling the virtues of Chinese solars?

Wed, 04/11/2012 - 22:15 | 2336694 francis_the_won...
francis_the_wonder_hamster's picture

Is Leo gone for good?  I may have missed his departure, but perhaps not his absence.

Wed, 04/11/2012 - 19:38 | 2336369 MeelionDollerBogus
MeelionDollerBogus's picture

Ya, ya, I know, I know... but I never got one in BEFORE him on an article so I thought it was funny.

Ok, I'm off to buy Greek bonds now that MDB has shown me the light :D

Wed, 04/11/2012 - 17:24 | 2335998 STP
STP's picture

You sir, are hilarious!  I love reading your unbelievably ignorant posts, because if you believe that the Greek Restructuring was a success, let me ask you who exactly is buying all their trash, I mean bonds?  Could it be the ECB?  Aren't they buying Spanish and Italian bonds too?  If they aren't, I'm sure they're bumping the Euro banks into buying them, by loaning them dollars, I mean swapped Euro's for cheap.

Green shoots!  I love it!  Too friggin' funny!  The only Green Shoots I see is the Green Shooting out of all the Central Banks in the world as they try to save the 'Too Big To Fail' buddies!

Wed, 04/11/2012 - 17:53 | 2336090 radwon
radwon's picture

And so another takes the bait.  

Wed, 04/11/2012 - 22:01 | 2336671 CrazyCooter
CrazyCooter's picture

Hehe, yup. I think there is an autism correlation with ZH readers ... WAY too literal ... even obvious satire.



Wed, 04/11/2012 - 21:50 | 2336644 RobertMugabe
RobertMugabe's picture

Does satire elude you?

Wed, 04/11/2012 - 18:42 | 2336213 CvlDobd
CvlDobd's picture

MDB called the pre Ron Paul v. Bernanke Silver breakout a bulltrap. So ffar he has been right. Interesting.

Wed, 04/11/2012 - 19:37 | 2336368 jcrockett870
jcrockett870's picture

is this sarcasim

Wed, 04/11/2012 - 19:45 | 2336391 q99x2
q99x2's picture

Hatched from the same egg that bored the world with a Hamy Wanger.

Wed, 04/11/2012 - 22:03 | 2336673 CrazyCooter
CrazyCooter's picture

Hamy was never so good and neither was RoboTrader ... MDB has the right blend of herbs and spices ... just my opinion, others may vary.



Wed, 04/11/2012 - 21:26 | 2336598 LongSoupLine
LongSoupLine's picture

The Greek restructuring turned out to be shining success - MDB


MDB, Man I wet mayself when I read that one.  Yet again, you prove to be king of all trolls.  props!

Thu, 04/12/2012 - 00:14 | 2336857 Lux Fiat
Lux Fiat's picture

Have always loved the avatar.  If I had fewer scruples, I might "borrow" it, but change it to "Mr(s). Bond Bubble".

Wed, 04/11/2012 - 17:07 | 2335943 slaughterer
slaughterer's picture

Someone is going to get badly TVIXed here.

Wed, 04/11/2012 - 19:48 | 2336406 q99x2
q99x2's picture

TVIX +33% in 3 weeks.

Wed, 04/11/2012 - 17:10 | 2335950 MeelionDollerBogus
MeelionDollerBogus's picture

Silly Rabbit, trix are for kids!

Maybe finally the crazy gold bugs will realize it's time to drop shiny rocks backed by nothing and go with the time tested US Treasury backed by the full faith & credit of the US gov't!

Yes, MillionFaecesBonus_, I beat you to it.


Wed, 04/11/2012 - 17:37 | 2336028 Yen Cross
Yen Cross's picture

Fiat Green is pass'e

Wed, 04/11/2012 - 17:42 | 2336045 slaughterer
slaughterer's picture

Fiat is for pussies.   Fuck Fiat.  

Wed, 04/11/2012 - 17:51 | 2336083 Yen Cross
Yen Cross's picture

I apreciate your input Slaugterer. Always will! Fiat is , unfortunately a medium of asset transfer.

 If I can profit from the " central banks", and park hard $'s , then I will!

Wed, 04/11/2012 - 20:09 | 2336461 AldousHuxley
AldousHuxley's picture

gold going back up in late summer '12 in time for election money printing and/or facebook IPO.


Obama isn't a retard like Bush who forgot to print shit during election time or maybe he wanted nigger adopting McCain to lose.



Wed, 04/11/2012 - 18:43 | 2336218 CvlDobd
CvlDobd's picture

Quit upvoting youself!


A Million Dollar Bonus post is great sarcasm. You are just lame.

Wed, 04/11/2012 - 21:57 | 2336657 RobertMugabe
RobertMugabe's picture

You lack all of the originality and sharp wit that makes MDB the best poster on this site.  "MeelionDollerBogus" -> Oh man that is GENIUS satire! Very Johnathan Swift-esq!

 Do everyone a favor and please stop demonstrating how unfunny you are.

Thu, 04/12/2012 - 04:53 | 2337041 MeelionDollerBogus
MeelionDollerBogus's picture

I'm going to cry.

Now I'm going to go pet my sharks and their lazors until I feel better.

Wed, 04/11/2012 - 17:48 | 2336057 Yen Cross
Yen Cross's picture

I'm ripping through these Junk/Bond charts.  Major divergence! That, is not always a bad thing, if you want to catch a falling "Machetti". The blade is resilient, and cheap.  Just a thought.?

Wed, 04/11/2012 - 17:49 | 2336073 slewie the pi-rat
slewie the pi-rat's picture

you want insurance with that shit, good lookin?

Wed, 04/11/2012 - 18:03 | 2336116 Yen Cross
Yen Cross's picture

I haven't spent the last 3 years in Singapore for nothing! Emerging markets look ok to me!

Wed, 04/11/2012 - 17:52 | 2336088 The Alarmist
The Alarmist's picture

"Good morning, Mr. Tyler. Going down?"

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