Here we have a study between the resulting move from a divergence between High Yield Corporate bonds (HYG) and SPX. The bond market seems to be ahead of every move when compared to the broader market and hints at strong reversals when divergencies emerge. If we look at every big reversal the last few weeks, HYG divergencies when compared to SPX have led to a strong reversal; whether HYG is making higher lows while SPX makes lower lows (bullish reversal on equities incoming) or HYG makes lower highs while SPX makes higher highs (bearish reversal on equities incoming). This is a great study to look at ahead of data as the bond market front runs the market!
What is a High Yield Corporate Bond? A HYCB is a type of corporate bond that offers a higher rate of interest because of its higher risk of default. When companies with a greater estimated default risk issue bonds, they may be unable to obtain an investment-grade bond credit rating- sec.gov
And in an environment where growth stocks have an obscure future given inflation and high interests rates which equates to drastic drops in consumer spending and economic strength, this is definitely something the market responds to quickly and swiftly.