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Take Careful Note of Credit Default Swaps and Junk Bonds

Well Mr Obama has certainly set the cat amongst the pigeons as it were.

As any trader will tell you, being able to discern a trend change from market noise is a fairly crucial to turning a profit year after year. One way is look at risk indicators such as credit default swaps.

US Corporate CDS Index

 We can see a small uptick, well within normal trend lines. So we think that there is still appetite for risk & would not call a change in trend at the moment.


Junk Grade Bonds are another often used risk indicator. The graph below certainly does not show any sign of weakness.

T Rowe Price High Yield Fund (MUTF:PAHIX)

 The Bloomberg Financial Conditions Index is also another market signal we review to help form and review our outlook.

Just based upon the above, we will be treating the recent weakness in equities as a buying opportunity.



Disclosure: Long DBC TBT SLV EEM