It's only Wednesday, but the weekly perspective on this ratio of high yield "junk" bonds to government treasuries is currently painting "Go" conditions. Often used as a proxy for overall market risk, the ratio trends higher when investor demand for high yield bonds is greater than their demand for government treasuries. The concept then is a rising ratio shows...
JNK/TLT is equal to HYG/TLT
IWM/SPY
IWM/QQQ
BTCUSD is a newer one. Time will tell if it holds up.
"Risk on" means risk on 'outperforms' risk off.
It does not mean risk on goes up and risk off goes down. They can move in the same direction.
with higher inflation and possible shrinking forward guidance, are corporate junk grade bonds less desirable now? maybe the market doesnt top out or pull back, but cpi over 5% while junk bonds yield mid 4% starts to sound less attractive for the risk, doesnt it?
TLT/HYG - RiskOff vs. RiskOn: Tells you how risky investors/lenders are...
The Chart presented maps the performance of TLT (risk off) vs. HYG (risk on). It is evident that there is currently a risk off move occurring in the markets. When TLT outperforms HYG, this is bearish for equites. On the chart, I inputted vertical lines on the periods where TLT outperforms...
The Junk / 20 Year Bond Ratio is showing early signals of continued if not increased appetite for stocks as an asset class. For anyone not familiar with this ratio, we're looking at HYG/TLT (or HYG/IEF which is also showing the same signs). In short here's what it means for you and me:
Falling Ratio = Credit Spreads Rising (bad for stocks)
Rising Ratio = Credit...
$SPY $TLT Looks like treasuries could rally against hyg. This is a correction in a down trend though for tlt. Supports theory that spy is also in a correction mode, but also in an upward trend
We have an interesting pair trade here, you can take a short position in HYG, paired against a long in TLT to capture the profit from the spread closing. Right now, HYG moved too much, relative to TLT, so it's bound to correct back down, giving us a low risk trading opportunity. Position size should be enough to theoretically risk 0.5-1% of the account if price...
As measured by the ratio between HYG (Junk Bonds) and TLT (US Government Bonds, 20 Year).
HYG is now outperforming TLT by 14% from the extreme level as that seen in late 2008.
Clearly the fears have outweighed the evidence for this disproportionate pricing of junk bonds.
Back in 2008 we had financial firms closing their doors, Lehman, AIG, Bear Stearns, Banks...
If you watch the S&P500 or invest in equities, you often want to know what the general trend in the market is and there is one very simple ratio you can watch that alerts you to when the conditions are dangerous. Oddly, the way the market works, however, is that once everyone has sold (or taken enough risk off of the table), the market can then find a...
