From Jeff Clark, Editor, Delta Report:
The junk bond market is selling off hard.
The less-than-investment-grade sector of the corporate bond market peaked about one month ago. The decline started slowly enough. But it picked up steam last week. And now, high-yield bonds are in free fall.
Here’s an updated look at the daily chart of the iShares iBoxx High Yield Corporate Bond Fund (HYG)…
It’s widely known that the action in the junk bond market tends to lead the action in stocks by anywhere from a couple of days to a couple of weeks.
Well, here we are… easily a couple of weeks into a sharp decline in junk bonds. Yet, the S&P 500 closed yesterday within 0.6% of its all-time high.
This divergence was the topic of conversation on a financial network television show yesterday. The talking heads discussed the breakdown in high-yield bonds and noted that stocks didn’t seem concerned. That prompted the moderator to ask the most dangerous question on Wall Street…
“Is it different this time?”
To my disbelief, the talking heads agreed that conditions were different. They went on to explain why a breakdown in the high-yield bond market would not lead to a stock market selloff this time.
Their rationale centered on the fact that so many high-yield bonds were concentrated in the telecommunication sector. Weakness in that sector is isolated. Other companies in other sectors are not experiencing the same sort of “credit crunch.”
Nonsense. While HYG does hold about 3% of its portfolio in telecom company bonds, many of those holdings are still trading above par.
The rest of the portfolio is well-diversified amongst a variety of sectors including energy, manufacturing, technology, pharmaceuticals, health care, retail, and others. High-yield bond prices in all of those sectors have fallen over the past month.
This could very well be the start of a “risk off” environment – where investors lighten up on their riskiest holdings.Right now, that means selling off some junk bonds. Soon, it will mean selling off some of their more volatile stocks.
This IS a warning sign for the stock market.
I can’t tell you for sure when stocks will react to the selloff in junk bonds. It could be today. It could be a month from now.
The only thing I can say with confidence is it is most definitely NOT different this time.
Best regards and good trading,
- DIESELGEDDON – America’s diesel supply on verge of catastrophic collapse, leading to HALTING of food, fertilizer, coal and energy
- Bidenflation Still Soaring, But Metals Dive -15% Since May 4th (Food UP 61.5% Under Biden, Gasoline UP 86%, Diesel UP 111%, Rents UP 16%)
- A Bizarre Skin Disease Is Mysteriously Spreading In The UK
- Now We Are Being Told To Expect Food And Diesel Shortages For The Foreseeable Future
- The NOPEC Bill Could Send Oil Prices To $300…HERE WE GO!
- The Everything Bubble Has Officially Burst… The Time to Prepare is NOW!
- Sudden rise of unvaccinated children with liver damage, were breastfed (by fully vaccinated mothers)
- Crypto losses now equal $1.7 trillion. The 2007 subprime mortgage market was $1.3 trillion. It’s highly likely that Crypto will be the catalyst for accelerated global collapse.
- Statement from the Ukrainian 1st battalion of 1st company of 115th Brigade
- Kim Dotcom – What is the end game?