Junk valuations keep climbing, but Citi not yet ready to turn bearish


The average junk bond yield of 5.18% is higher than the all-time low of 4.93% hit exactly one year ago, but valuations may be even richer now, says Citi.

First off, Treasury yields are higher today, meaning spreads are narrower than they were last year. Secondly, current yields have been sustained at these low levels for a much longer period of time than last year. Citi also notes May has been a seasonally weak period for high-yield ever since the financial crisis.

"Will elevated valuations and the calendar turning to May cause the bears to come out of hiding," asks Citi. "To be honest, it’s been very difficult being a bear in this market. The relentless Treasury rally has caught us by surprise."

ETFs: HYG, JNK, HYLD, HYS, SJNK, PHB, SJB, HYHG, ANGL, HYLS, UJB, XOVR, THHY, YPRO, QLTC, SHYG, HYND, HYZD

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Comments (2)
  • bbro
    , contributor
    Comments (11217) | Send Message
     
    Look at 2 year swap spreads....
    12 May 2014, 12:54 PM Reply Like
  • lbtaockham
    , contributor
    Comments (38) | Send Message
     
    Keep an eye on the charts. They will tell you what strong-handed investors are doing regardless of what they are saying. Long-term support has not been broken and there have been recent breakouts above falling resistance lines. We publish high yield charts for muni, emerging, US corporate, and global bond funds at JunkBondRecycling.com for information and educational purposes. Charts tell the real stories.
    19 May 2014, 12:11 AM Reply Like
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