Info!! The Curious Relative Weakness Inwards Junk Bonds

The recent post noted the underperformance of high yield corporate bonds relative to high character bonds over the terminal few months.  In general, a preference for riskier, high yield fixed income has suggested a full general conduct a opportunity appetite alongside investors, whereas periods of underperformance convey been associated with a broader conduct a opportunity aversion.  

The nautical chart higher upward extends the hold back at the human relationship betwixt high yield (JNK) together with high character (LQD) bonds dorsum to the begin of 2008.  What you lot tin run into is that relative involvement inward high yield returned early on inward 2009 together with roughshod off significantly during the summertime 2011 risk-off period.  Notice, however, that every bit stocks (SPY) convey since moved steadily to novel highs, the relative human relationship betwixt JNK together with LQD has remained below that 2011 peak.  Moreover, the volatility of the JNK:LQD human relationship has declined significantly during the same menstruum that stock volatility has been crushed.

Since five-week realized volatility inward JNK bottomed early on inward June of this year, we've seen a notable uptick inward high-yield volatility.  Not surprisingly, that has been accompanied yesteryear a selloff inward stocks.  Given the underperformance of high-yield bonds to a greater extent than oft than non together with directly their uptick inward volatility, I volition hold upward watching the sector closely for signs of conduct a opportunity aversion that could behaviour upon markets to a greater extent than broadly.
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