Displaying items by tag: rates
By any reasonable measure, high yield bond markets look very scary right now. The way that yields have plummeted, the way that covenants have weakened, and the general ease of accessing credit are all reminiscent of 2005. Spreads over Treasuries have fallen to just 300 bp. A year ago they were at 600 bp. Companies have successfully weakened investor protections in new issues without penalty, and crucially, default rates will likely fall below 1% this year. The picture was the same in 2005.
FINSUM: By the Crisis, default rates hit 14% and high yield investors got killed. However, a big correction in high yield would take a catalyst. Is it a sooner-than-expected Fed pullback?
The summer bond market has a pretty predictable summer pattern. Normally…see the full story on our partner Magnifi’s site.
Treasury yields sank last week, before rebounding strongly late in the week…see the full story on our partner Magnifi’s site.
The market took a nosedive in the middle of the day today as investors were walloped with a hot CPI inflation reading. The CPI rose an eye-popping 5.4% in June, with core inflation coming in at 4.5%. The market was anticipating a flat 5.0% CPI number. Indexes turned downward immediately following the report. It should be noted than June 2020 was the nadir of the pandemic inflation readings, so that makes this report look even bigger.
FINSUM: The inflation boogeyman returns. Beware a big sell-off across the board in bonds, especially if the Fed or a member of the Fed makes any tightening comments.