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Other than Carl Icahn who is bearish and betting against junk corporates, I have never in my investing/trading lifetime seen so much bullishness regarding the junk bond market. I can fully understand this bullishness. Still, it makes me very wary from a sentiment and contrarian point of view. As for junk munis, I am now 50% in cash and will probably be 65% cash at the close. And I fully expect to be scampering right back in sooner than later. But until price stabilizes and begins rising again........
It's breathtaking how quickly traders jump on any 'oversold'-like opportunity. That article was published today, apparently written a few days ago (it's a little stale on the HY spread peak, which happened last Wednesday per the FRED calculation). While the spread's still in decent 4+ territory, the data FRED uses says it's 58 basis points off the peak already, at 4.50% as of yesterday.
Best, AJ
P.S. #1: The article referred to a different source for the spread.
P.S. #2: Put the FRED chart at 1 year to be able to see the very recent movement in the spread clearly.
This is so true, Andy. the spreads snapped back with the vengeance: if one were to annualize the HY performance over the last couple of days, it would have been 106%! kind of telling how desperate market participants are for investment opportunities.
It's breathtaking how quickly traders jump on any 'oversold'-like opportunity. That article was published today, apparently written a few days ago (it's a little stale on the HY spread peak, which happened last Wednesday per the FRED calculation). While the spread's still in decent 4+ territory, the data FRED uses says it's 58 basis points off the peak already, at 4.50% as of yesterday.
Any time you see articles of why now is a great time to buy XYZ asset class, it's time to get cautious, IMO.
Most of these financial writers are all talk. Their job is to write about stuff. I will bet 98 out of 100 vastly under perform a 60/40 mutual fund. By the time junk funds are on their radar screen, most of the move has probably occurred.
From what I can tell this particular article is written by a fund company that actually has a High Yield ETF.
Not bashing you John, just chiming in with my $0.02 fwiw.
I'm one of the investors who bought HY at this late date. Actually this past summer and then another purchase a couple of months later. Why? I had become overweight on the equity side and I wanted to get a bit more conservative too. It all just happened to coincide this past summer. The new unconstrained bond fund holdings are supposed to fare better in rising interest rate environments and we are at the cusp of that.
I generally do not make large wholesale changes in my portfolio but rather smaller ones that get me to the destination I want.
Yes I did notice the sales pitch in this article. Sadly, a lot of articles on the web have ulterior motives.
Yes and it has been good for me as I put another amount into ASDVX as part of my asset allocation rebalancing. I got lucky and got it when things were down for HY. I admit I have very little knowledge on this specific subject but I learn every day as this is a long term holding.
Years ago I had told myself I would never invest in junk, only high quality bonds. Times and circumstances have changed since that time way back. The credit crisis was not envisioned then.
Comments
Thanks for positing. Good informative reading.
Old_Skeet
Best, AJ
P.S. #1: The article referred to a different source for the spread.
P.S. #2: Put the FRED chart at 1 year to be able to see the very recent movement in the spread clearly.
Most of these financial writers are all talk. Their job is to write about stuff. I will bet 98 out of 100 vastly under perform a 60/40 mutual fund. By the time junk funds are on their radar screen, most of the move has probably occurred.
From what I can tell this particular article is written by a fund company that actually has a High Yield ETF.
Not bashing you John, just chiming in with my $0.02 fwiw.
I'm one of the investors who bought HY at this late date. Actually this past summer and then another purchase a couple of months later. Why? I had become overweight on the equity side and I wanted to get a bit more conservative too. It all just happened to coincide this past summer. The new unconstrained bond fund holdings are supposed to fare better in rising interest rate environments and we are at the cusp of that.
I generally do not make large wholesale changes in my portfolio but rather smaller ones that get me to the destination I want.
Yes I did notice the sales pitch in this article. Sadly, a lot of articles on the web have ulterior motives.
The spread fell another 6 basis points yesterday.
* Moody Blues, In Search of the Lost Chord, 1968.
Yes and it has been good for me as I put another amount into ASDVX as part of my asset allocation rebalancing. I got lucky and got it when things were down for HY. I admit I have very little knowledge on this specific subject but I learn every day as this is a long term holding.
Years ago I had told myself I would never invest in junk, only high quality bonds. Times and circumstances have changed since that time way back. The credit crisis was not envisioned then.
All the best.