Holding High Yield/High Income funds.....take note !

catch22

Howdy,

A quick note. Both HY etf's JNK/HYG are down ranging from -1.5 thru -1.8% this afternoon (June 16). A similar pattern happened just about 1 year ago to date, when Greece Part 1 took place. Greece, Part 2 among other weakness appears to be the driving force in the high yield sector downward pressures again. Credit quality or lack of; is in place for many bond sectors.
Both JNK and HYG have crossed below the 200 day moving average; and actually the poor Relative Strength is what some would consider a "buy" point. Also note that this sector recovered again in about a month in 2010. Will this be the case now? I don't know.
All of our HY/HI funds have passed down thru their 50 day moving avgs; but would have a ways to go to hit the 200 day moving average. You may reference any of these via the M* link here at MFO.

SPHIX, DIHYX, DHOAX and others you hold or are aware of.....

These two etf's may help you guage the overall directions and any strong moves up or down will not neccessarily be related in kind in a broadly mixed HY/HI fund. Although the tracking would likely be similar in direction.

If you do not regularly monitor this sector; you may choose to so for the near term, as there already has been weakness in the area for the past several weeks.

We are not selling anything today; but will be watching again on Friday for any possible reductions of holdings.
THE big question would be where to move the money.

Regards,
Catch

[Deleted User]

Today I bought 3 closed end funds for income. I have usually avoided CE funds but took small positions in FMY, RCS and PDT. All are earning their distributions and have not cut the distribution and have positive unii, some of my criteria.

fundalarm

hi mark/catch. HY dismal recent performance is not due to Greece. It is due to the slowing US economy and, even more so, due to the technical factors. Fed came to the market recently to sell billions of dollars of mortgage-backed securities they purchased from AIG in 2008. With softening housing prices, these sales created a huge downward pressure on MBS prices. MBS holders started buying cheap and liquid hedges in junk credit default swaps. When you buy them, their price goes up. When the price of protection from default goes up, then the price of underlying asset goes down. So all corners of the credit markets have come under stress. Last week the Fed was trying to sell a tranche of $3.8 billion, but ony found buyers for a half. Again, this is a bit technical in nature and you might want to sit this through.

catch22

Howdy JR,

Yes, to your above and I noted other related weakness. However, I do believe the edge placed again towards a problematic "fix" for Greece and related side effects that will show for and against Portugal, Spain, Ireland, Italy are also putting more pressure in this area. Many big institutions have monies and/or insurance hanging in the balance as to fixing a most serious problem with the least amount of financial damage. I am not so sure this will be able to come to pass. The CDS rates having been moving up again in bond areas; and the remainder of the unknowns going forward with the rest of the global economy are all placing pressures.
We have held the HY/HI for more than 2 years and have a decent NAV cushion; but of course, none of us want to find our money going backwards.

As always, your insight and comments are most welcome; and I am pleased to know you are still reading through the messages. Thank you again and don't be a stranger here.

Take care of you and yours,
Mark/Catch