High Yield bonds have been in the news this past week, eh? Some folks sense a twitch to the "dark" side of investment land and perhaps a prelude to something else. Tis not pure profit taking as the returns YTD are not in need of a hair cut. Articles have noted the failure to secure loans at a "decent" rate for financing in a few retail sector companies. One may presume there is good reason to "demand" a higher rate.......like, we're not happy with the forward business model. Makes sense, yes?
@bee , I recall, placed a post which included debt burdens of large retailers. This is one sector that indeed may be on shaky ground to pay off the debt, but is not a large percentage of outstanding high yield bond area.
So, are junk bonds just a forward view of the growth potential of the economy in general? My pay grade is not high enough to know the answer. I'll let the technical indicators point the way.
---High Yield below. A few choices on the list have been prior holdings; although we do not currently hold any HY directly. Of the 6 below, one may be able to "see" the value of active management.
1 week and YTD
ARTFX = -.7%, +7.9%
SPHIX = -. 8%, + 7.4%
DHOIX = -.7%, + 6.5%
PRHYX = -.8%, + 6.4%
HYG = -1%, +5%
JNK = -.9%, +5.4%
The below chart for the above from June 2 through Nov. 10
http://stockcharts.com/freecharts/perf.php?ARTFX,SPHIX,DHOIX,PRHYX,HYG,JNK&n=113&O=011000Lastly, at least related to the etf side of high yield is that etfs are "used" by hedge funds and other similar to help them use the efts as portfolio "insurance" or "adjusters" or whatever phrase/word one prefers. I would not be surprised that the option side of calls/puts has had some effect on HYG and JNK.
Let us keep our fingers crossed that companies make enough profit to pay off the "investment grade bond" debt, too; lest it become junk.
---HY bond $ issued 2016 = $204 Billion; 2017 to date $240 Billion
---IG bond $ issued 2016 = $1.16 Trillion; 2017 to date = $1.2 Trillion Oh, well.
Good night,
Catch
Comments
Ray Dalio, Bridgewater Hedge Fund. Buys/Sells related to some of the above regarding etfs inside of hedge funds. Scroll down the article for all info.
https://www.gurufocus.com/news/594584/ray-dalio-buys-ishares-core-msci-emerging-markets-spdr-gold-trust-ishares-20-year-treasury-bond-etf-sells-ishares-msci-south-korea-capped-index-fund-chesapeake-energy-corp-southwestern-energy-co
http://news.morningstar.com/articlenet/HtmlTemplate/PrintArticle.htm?time=1823137