What Does High Yield Credit Know That Stocks Don't?

While stocks, gold, and the dollar are generally in sync, Treasuries appear modestly more bearish now (for stocks) but it is the high-yield bond ETFs that is making a few people nervous as they plunge on heavy volume (and well below their intrinsic value). Obviously no-one really knows what i going on at JPM, but fort some more color we note that IG9 10Y is trading wider once again offered at 169bps - so one wonders if the liquidity in HYG is allowing some unwinds (or more hedges to be laid out). Certainly stocks remain ignorant of it for now - though month-end may be impacting both.

SPY (green) versus HYG (red) with HYG's intrinsic value (dark red)...

and on both our ETF-based (SPY Arbitrage model - based on SPY's relationship to HYG-VXX-TLT) and cross-asset-class (CONTEXT model), stocks look a little rich once again...

 

Chart: Bloomberg