Both Junk and Emerging Market Bonds Remain Strong

Is the pull back in "everything" a few days ago the start of something grander or is it merely manic behavior of weak hands who just recently dived in or geared themselves up too much? If this was the beginning of the real thing then we would have already seen a move away from risky assets and into "safe-haven" assets. Specifically we should have already seen a mass exodus from high yield corporate bonds and into investment grade bonds, and also from emerging market sovereign bonds and into US Treasuries.

From what we can see in the graphs below this clearly has not happened. The weakness we have seen over the last few days is nothing outside normal market volatility which is certainly not enough to suggest a change in trend.

We conclude that the recent weakness in equities, commodities and high yield currencies was nothing more than "profit-taking". Accordingly we see this as a buying opportunity for commodities and equities and selling opportunity for US Treasuries.

Disclosure: Long JNK, DBC, TBT, EEM.