HYG

[gapcap1]

sell-offs in hyg in july and in sept. were precursors to to sell-offs in es

although, es continues to make higher highs, a divergence exists with both hyg and $vix -

further pressure on hyg combined with a spike in vol could auger a break in es

[RalphR]

The bond market is smarter than the stock market. Thanks for the info.

Regards,
Ralph

[Pascal]

Good note about HYG.

I also wonder whether the USD reversal will not lead to a reversal in the carry trade.
We only need a pretext to pull markets down and build new conditions for another shorts covering rally.



Pascal

[gapcap1]

nice call on the usd/jpy; certainly some algos were triggered this evening and subsequent unwinding of carry trades will surely follow

concomitant with your continued scrutiny of xle and my vigilance of hy credit markets is the fact that one of the by- products of the grab for yield, has been the ability of lower rated oil companies to raise capital in the debt markets. energy now accounts for nearly 16% of the junk bond market and is the 2nd largest component of the high yield market. a continued rout in oil prices might have an undesirable effect on indebted oil companies' ability to repay their debt.

[Pascal]

nice call on the usd/jpy; certainly some algos were triggered this evening and subsequent unwinding of carry trades will surely follow

concomitant with your continued scrutiny of xle and my vigilance of hy credit markets is the fact that one of the by- products of the grab for yield, has been the ability of lower rated oil companies to raise capital in the debt markets. energy now accounts for nearly 16% of the junk bond market and is the 2nd largest component of the high yield market. a continued rout in oil prices might have an undesirable effect on indebted oil companies' ability to repay their debt.

Interesting! It is maybe the reason why XLE has been outperforming XOP in the past weeks.
Investors are not looking for growth in the energy sector. They pay more attention to risk.


Pascal