Junk Soars Again

The iShares high yield corporate bond ETF (HYG) is up big once again today. As shown below, HYG is up 3.64% on the day and 25.64% since its low on November 20th. Many equity investors are waiting for risk-taking to return to the fixed income markets before taking risks in the stock market. Based on the action in junk bonds over the last month or so, the risk trade seems to be coming back.

click to enlarge

Comments

[morph366:]

The 80 level on this index fund coincides with the 200 day EMA and the 62% retracement of the major bear move down - a lot of the easy money may have been made and it could be time for many traders to digest some of this renewed appetite for risk taking

Jan 06 08:14 AM

[k45:]

We have had an insane "flight to safety" where everything but Treasuries were dumped. Negative yields in Treasuries was just plain insane, while everything else was ignored and junk bond prices dropped unreasonably low. Junk bond yields are higher than the associated risks justify. When people wake up to the insanity of buying Treasuries, they will look for something with a decent risk/reward ratio. With zero reward, Treasuries do not have a reasonably risk/REWARD ratio. Investment grade bonds aren't much better.

Jan 06 09:14 AM