HY= high yield option adjusted spread
IG= investment grade option adjusted spread
HY-IG Option Adjusted Spread showing significant inverse/negative correlation to the S&P500.
When the HY-IG spread (white) rises we see the S&P500 (yellow) fall. The inverse is also true. Spread is currently trending down and SPX is rising which could be indicative of a short term...
When the spread between High-Yield (HY) debt and Investment Grade (IG) debt contracts or expands, this can be perceived as the market demanding more or less compensation for the risk it perceives to be present in owning the HY debt against the IG corporate debt. (HY-IG) = Risk On/Risk Off market sentiment.
Generally speaking HY debt a.k.a. Junk Debt, is...