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Peter Tchir
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Peter started TF Market Advisors in 2011 as a platform to trade and provide market information. The trading strategies are macro, but the direction and value decisions are based on insights into the credit markets. The firm’s commentary has been gaining respect and Peter has become a recognized... More
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  • Liquidity is evaporating in European Sovereign Debt Markets - Again 0 comments
    Jul 6, 2011 8:37 AM | about stocks: HYG, SJB, SPY, JNK

    Portuguese 10 year bonds now yield 12.1%.  That is 137 bps more on the day!  Ireland also yields just over 12% but is "only" 73 bps more on the day. 

    Even more interesting, is the move in 2 year bonds.  Both these countries 2 year debt is well over 14% and moved over 200 bps on the day. 

    French and German bonds are actually up in price, as investors in Europe are de-risking.

    SOVX is back to 245.  That is above where it closed on Friday June 24th.  (NYSEARCA:SPY) closed that day at 126.8 and closed yesterday at 133.81.  (NYSEARCA:HYG) closed that Friday at 89.47 and finished yesterday at 91.33 (and paid a 0.58 dividend). 

    Yes, the data at the end of last week was helpful, but it wasn't that great and I would take this opportunity to sell out of some risk in stocks (SPY) and junk bonds (HYG) (NYSEARCA:JNK).  

    The high yield market seemed to have some quarter end window dressing built in, as investors took advantage of the supportive stock market to lift some bond offerings and drive prices up coming into the end of the month.  The CDX indices had a very typical short covering rally.  The hedges outperformed the broad markets as shorts capitulated and investors rushed to take off hedges.  IG16 for example, went from trading 4 to 5 bps cheap at the height of the concerns to 1 bp rich by the end of last week according bloomberg.  That basis is starting to widen again as investors look for hedges.  The cheapness is still tolerable and is the most effective hedge, but if we get much more widening, the weakness will have to trickle into the underlying markets more. 

    (NYSEARCA:SJB) is a decent way to short the high yield market.  I think today we can see high yield perform in line with equities on the way down for at least a few %, with far less risk of a gap up. 

    Stocks: HYG, SJB, SPY, JNK
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