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High-yield defies the bears

  • The quest for yield as it relates to the bidding up in junk bond prices will end in tears, says JPMorgan strategists, but not until at least next year. Defying the bears, high yield prices continue are heading higher this year, and - putting its finger in the wind - Barclays late last week lifted its full-year return forecast to 5.5-6% from 3.5%.
  • The team takes note of the spread to Treasurys - it's fallen to 345 basis points, already below the firm target of 350. "Although some of the incremental risk-taking could cause some challenges in the medium to long term, we do not see cause for concern in 2014 and believe high yield will continue to be well supported."
  • The shorts? The volume of borrowed shares on BlackRock's HYG soared to an all-time high of $3.6B at the end of last month. For State Street's JNK, short bets neared $1.3B, also a record.
  • ETFs: HYG, JNK, HYLD, HYS, SJNK, PHB, SJB, HYHG, ANGL, HYLS, UJB, XOVR, THHY, QLTC, SHYG, YPRO, HYND, HYZD
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Comments (1)
  • lbtaockham
    , contributor
    Comments (36) | Send Message
     
    We just completed a technical analysis on two large total asset corporate high yield bond funds: VWEHX (Vanguard), BHYSX (Blackrock). Chart patterns look positive with falling resistance being broken in both cases and rising long-term support in place. Here is the link if anyone is interested:

     

    http://bit.ly/1fwrbNG

     

    As I have said in other comments, we don't see any reason to short high yields at this point.

     

    Thanks,
    Lesmore
    30 Apr 2014, 12:59 AM Reply Like
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