And then everybody starts to advise of buying corporate bonds. Your local banker or adviser is tipped by head office that there is something going on in this universe and hey, we even see some activity coming back to the bond market.
Well, it’s very posh to ditch Treasuries for the moment and invest in high-grade debt or even junk. The reason corporate bonds look attractive, is that more and more companies carry the silent guarantee from the US government but/and they are far, far cheaper than the governments’ own paper.
Well, it’s very posh to ditch Treasuries for the moment and invest in high-grade debt or even junk. The reason corporate bonds look attractive, is that more and more companies carry the silent guarantee from the US government but/and they are far, far cheaper than the governments’ own paper.
A red light flashes.
We read on the Alphaville site:
There is a bubble in Treasuries. But it is an engineered bubble. One which has been encouraged and one which will only pop as rapidly as the economy recovers. Given that the weight of macroeconomic turbulence has yet to hit, that popping shouldn’t be total and shouldn’t come all at once or for that matter, anytime too soon. And while other areas of the bond market are looking attractive, they are so only because fears of the worse corporate default rate since WW2 are very real and very persistant.
And for the moment this thesis seems the right one: after a rush into high grade bonds, the dust is settling down. Our renko-charts are proving this.
We look to the iShares iBoxx USD High Yield Corporate Bond Fund (ticker: HYG) and mention that after the rally in December the tide has turned. For the moment. Profit taking? Or is it rather cooling down of a hype?
The CCI went below 100 and the SAR switched above the price. A copybook set-up of a turning trend.
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