Morgan Stanley not buying junk rally

|By:, SA News Editor

Among the incongruent signs: Small-caps usually move in tandem with high-yield prices, but while the Russell 2000 is off 3.8% YTD, junk bonds are ahead 4.4%. Another is top-rated junk bonds outperforming lower-rated paper - the lowest rank assets usually outperform when there's an optimistic outlook on the economy.

"Not entirely consistent" with a "risk-on" market, says the team. "Given these factors, as well as low volatility, we think hedging credit risk is both cheap and a sensible strategy in this environment.”

ETFs: HYG, JNK, HYLD, SJB, HYHG, ANGL, HYLS, UJB, XOVR, THHY, QLTC