Contagion: Credit Crashes To 14-Month Wides Amid Soaring Outflows

Yesterday saw rate vol start to accelerate, and today we see credit markets start to snap as equity market volatility contagion is spreading.

In fact, credit market volatility is spiking - and is above the Aug 2015 highs (higher relative to stocks where VIX remains below those levels)...

This is the biggest spike in High Yield bond spreads since Aug 2015's crash and raises relative funding costs to their highest since Dec 2016...


It's not just equities that are seeing fund outflows surge.

Junk bond ETFs have seen only 2 days of inflow in 2018, and outflows are accelerating as prices plunge.  IG bond ETFs have also seen outflows for 6 of the last 7 days...


And judging from the discount to NAV, there is more 'physical' selling to come in corporate bonds (as managers use JNK as their overlay, then selectively sell into illiquid markets...


And one might wonder how much longer the S&P will hold its gains?


Comments Fri, 02/09/2018 - 13:06 Permalink

“You must acknowledge deep in your heart of hearts that people are supposed to fuck. It is our main purpose in life, and all those other activities—playing the trumpet, vacuuming carpets, EYES GLUED ON THE STOCK MARKET, eating chocolate mousse—are just ways of passing the time until you can fuck again.”
— Cynthia Heimel



In reply to by

Bemused Observer Fri, 02/09/2018 - 13:02 Permalink

There's some good news...all of the fundamentals that led to 2008 are still in place, they haven't been fixed...

So all of those indicators you ignored on the way up? No worry, you'll get a second shot at them on the way down.

And they will be far uglier than you remember.

Dilluminati Fri, 02/09/2018 - 13:06 Permalink

I borrowed cash off of my credit card and bought shitcoin.  I just don't open the mail and have run out of other credit cards to transfer me balance to.