Get started

Junkbonds

3 signs to lighten up on stocksVix, MMTH, and Junk bond yields trade along stocks to add color to this movie. SP500 stocks are businesses with earnings yields that grow over time, but stock dont trade alone in a vacuum. Investors can choose to get in, get out, sell puts, buy bonds, or stain short term money market assets. if we look back at history, we can also compare what different risk on risk of times felt like and remind ourselves what times of thin yields feel like and what times of high perceived risk feel like. Feel free to comment and add to the conversation so we all learn together. cheers!
SP:SPX
by optionfarmers
JNKTLT A bond ratio that could give a perspective on stocksThis is the ratio of High Yield Bond ETF to the 20Y T BOND. Not a ratio seen a lot but on the 1M time-frame it provides some perspective to the periods of high volatility/ correction on stocks. The blue trend-line is the Dow Jones (DJI) index (stocks). As you see, every time the JNKTLT ratio hit its Lower Highs trend-line, stocks have turned sideways at best, undergoing a volatility phase. Last month, the ratio closed above that line for the first time in history. Even though we are on a sharp correction since the start of the year, does that break-out mean that it enters a new bullish trend and completely different pattern? And if so, could it indicate that the correction is about to take a stop? What do you think? -------------------------------------------------------------------------------------------------------- ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** --------------------------------------------------------------------------------------------------------
AMEX:JNK
by TradingShot
2
Man Behind The CurtainThe FED's monetary policy is a lot like that scene in the Wizard of Oz where they think they are communicating with a great and supremely powerful wizard, but Dorothy's dog incidentally pulls back the curtain while sniffing his leg. To the disdain of Dorothy, Tin and Straw man, it's just some goofy looking guy pulling levers and talking through a loudspeaker while pressing buttons to release fire and smoke. Dorothy proclaims "You are a very bad man!", and the wizard says "No, I'm just a very bad wizard." Look it up if you haven't seen it. Highly recommended! This is exactly what's happening to the FED. Lots of fire, smoke, ego stroking going on among the board members who think they are all powerful, supreme beings. Oh and don't forget about the insider trading and general theft of what is supposed to be the public's money supply. In GOD we trust? More like, In SMOKE we trust. Eventually, the curtain will be revealed and the irrational belief of the wizard will be no more. If you look at ONLY junk bonds (orange), which is what this idea is about, as opposed to other facets which the FED is able to "bail out" the economy, you can see that the market was beginning to signal in 2008 that investors should avoid risk. Yields were going up, bond prices were declining. An economy with such conditions where people save and preserve wealth is blasphemous behavior in the church of the FED and WILL NOT BE TOLERATED. Bonds were quickly bailed out over the next few years while rates were suppressed and the entire market was coerced into the FED's vision. If you adjust the junk bond index in real terms and simply divide by the money supply (teal line), you can see that with the 2020 bailout, the current purchasing power of bonds has been eroded to the 2008 level, right at the point where people were beginning to save money. Other things have been bailed out as well via the money supply this time around, so we're certainly looking at a skewed metric here. But in junk bond terms, It looks like we would need even more stimulus to stop a deflationary spiral beyond what was seen in 2008-2010 if bond investors are looking at real M2 adjusted terms. The money supply ALWAYS speaks the truth, historically speaking. Now, contrast this with the current outlook of the FED where they are soon going to be selling "assets" off their balance sheet at a maximum of about 90 billion per month. How are WE, the general public, supposed to believe that a deflationary spiral is avoidable if real bond valuations are already at a level where a bailout was "necessary" to these "wizards" in 2008, while at the same time, they haven't even begun offloading these "assets" which they have recently accumulated, which someone is suddenly supposed to want to buy at a record pace not seen before?? Maybe they will finally raise rates and will buy all junk bonds? I mean who else is buying junk bonds, seriously? If something has to be labelled as "high yield", we should probably be skeptical beyond the point of being able to be persuaded UNTIL the market speaks otherwise. But at the same time, they cannot raise rates very far, at least not to the point which is necessary or was necessary in 1980, for example. Just something to think about. In my opinion, there is NO WAY the M2 can ever be contracted, at least not by the amount the FED wants. You pretty much need exponential expansion forever. And at this point, why would anyone believe them? In 2018 they released a projection that their balance sheet would be down to 2T by 2022. Their credibility and foresight is awful. A randomized monte carlo simulation was more accurate than their predictions, so why should we believe in a delirious vision? As far as I'm concerned, until the FED lets their 7T bag of crap rot, we've got a communist monetary policy where the government owns a stake of everything. Just think of how many businesses are backed directly or indirectly by mortgage backed securities and junk bonds, which the FED has purchased using the wealth of the public. I couldn't think of a more pure definition of communism. Those "assets" were paid for with stolen wealth and these actions are a repellent to any free market economy or dynamics. In a free market, bankruptcy is allowed and malinvestment is left to crash and burn and is NOT ABLE to bring the rest of the economy down with it. We don't have that. ----------------------------------------------------------------------------------- How I got the values in the chart: Pay no attention to the actual values in the chart other than M2. The other values are purely to make a side by side comparison that looks decent on a log scale chart. 520W(10 year) MA of M2 = 4845136 520W(10 year) MA of HYG = 87.68 M2 is in millions, HYG is not, but we can ignore this because we are adjusting for relative averages. 4845136 / 87.68 = 55259 Now we simply chart HYG*55259, and now HYG in 10 YR terms is charted relative to the 10 YR MA of the M2. In order to chart HYG/WM2NS, I simply stuck a multiplier at the front, and added zeroes until it looked good on the chart. ----------------------------------------------------------------------------------- Thank you for reading! I really do appreciate your time and I hope my perspective was somehow useful to you. Don't forget to hedge your bets! :)
FRED:WALCL
by fringe_chartist
1
Watch Corporate Bonds - Bond Selloff to Trickle into Stocks?LQD has just had 4 consecutive closes below the 21 ema, this may well be a sign of weakness in an already overextended market. As you can see, LQD and the SPX have had a very tight correlation, particularly since the liquidity hose was turned on after the market crash in March. This is why a selloff in the bond markets, may very well forewarn of a potential correction (perhaps severe, perhaps just mean reversion). This is made more concerning, with the selloff in HYG occurring in tandem with the selloff in LQD, the question i have is, what do the bond investors know that equity investors do not? -TradingEdge
AMEX:LQD
by Profit_Link
4
Might get stimulus tomorrow; high-risk short term playTrump is meeting with bank CEOs today to discuss how to support small-cap companies with large debt burdens. The high-yield junk bond market has been bleeding lately because many of these bonds are expected to go into default later this year. However, if Trump's meeting produces some kind of stimulus or bailout, we might see this market rally. Cheap March 13 or March 20 calls might be a winner if we get a positive headline in the next few days.
AMEX:HYGLong
by ChristopherCarrollSmith
Indicator to track IG-bonds erosionSee M. El-Erian last articles about credit quality erosion. US market has near 5 trillion of A grade and BBB bonds. Economic shock may cause downgrade of these bonds to junk levels which will launch sell-off of these 5 trillion papers. So we take Ishares quality bonds ETF which includes only AAA bonds (QLTA) and deduct from it performance of Ishares ETF which buy IG bonds near junk levels when managers emphasize positive prospects of emitents (FALN). Quality minus near junk index. When indicator increase it (!)may tell about downgrades of BBB bonds to junk levels.
AMEX:QLTA
by Alexander-R
S&P 500 likely will not hold support on MondayExpect a red week this week as the SPX plunges toward 2700. Odds of a recession by November have climbed to 62% on the PredictIt prediction market as Russia and Saudi Arabia kick off a price war in oil and gas. As oil and gas prices fall, the risk of upcoming defaults on high-yield corporate "junk bonds" increases greatly. That puts the banking sector at risk, especially because of the "leveraged loans" that big banks have been providing to the oil and gas sector. Meanwhile, coronavirus continues to spread, putting more strain on the travel and entertainment sectors. We're likely to see the number of cases in the US start to rise fairly quickly in the next two weeks, bringing further disruptions. There will be further interest rate cuts, but they're likely good for only a one-day rally. Stay short until we get serious talk of a government junk bond bailout.
SP:SPXShort
by ChristopherCarrollSmith
12
JNK / W1 : Overbought & Divergent... Risk down the corner ?NOTE : The low risk trading area reamains higher in the context channel (the gray ribbon) but we're signaling overbought on the trendchannel... This may be a concern if the market reverses here... Cause reversing on trendchannel means there will pbly be a trend trade to come right after... Not the best case scenario for stock though if junks were about to break down the major support trendline. SIDE NOTE : Some analysts say that there is a dangerous bubble in corporate credit... So this may add to the technical view seen here. If anything goes wrong in the sector, junks may be the first to show signs of tension... CONCLUSION : It's not something to trade just like that, more likely something to bare in mind for the coming months... as a potential systematic risk trigger that could cause hell of a panic wave... Hope this idea will inspire some of you ! Don't forget to hit the like/follow button if you feel like this post deserves it ;) That's the best way to support me and help pushing this content to other users. Kindly, Phil
AMEX:JNK
by PRO_Indicators