Credit Spreads - About to Blow?While credit spreads, which reached near-historic lows in 2024, remain tight, they have widened notably since the beginning of 2025. If this trend accelerates, it could put substantial pressure on the bond market, resulting in tighter financial conditions and corresponding headwinds for the domestic
About ICE BofA US High Yield Index Option-Adjusted Spread
The 3-way of Economic Nightmares.I recently had a discussion on X, with regard to the Forecasting ability of High Yield Spreads. I was making the claim they do possess Leading Indicator qualities, while a gentleman took the other side of this debate.
To illustrate my views, I've put together a chart of FedFunds Rate, Unemployment
Market Stress and Bitcoin Price Reversals2008 Financial Crisis: Marked by a severe spike in the high yield spread, significant S&P 500 decline, and aggressive Fed rate cuts to stabilize the economy.
COVID-19 Market Crash (2020): Triggered sharp increases in market volatility and credit spreads. The Fed's rapid rate cuts aimed to support th
HY Junk Bond Spreads and SPX CorrelationAs you can see clearly on this chart, there is a high correlation between the BofA Option Adjusted Junk Bond Spread Index and the S&P500. While tough to use as a timing tool, when spreads widen to 4.5% or so, many times this is a good time to nibble in the S&P during a correction. When they reach 6%
BULLISH SETUP ON HY-IG SPREAD EMERGING. (BEARISH EQUITIES)Back in November of 2022 I wrote about using the HY-IG spread as a potential indicator of 'risk on' vs. 'risk off' sentiment and I will insert that below for readers trying to understand how this spread differential can be utilized. Subsequently I will explain what I currently see emerging on the ab
Jaws closingThe high yield (junk bond) spread against Treasuries, having earlier moved above the important 4% threshold, continues to advance higher. It has now eclipsed 5%. Accompanying this indicator is the $SPY decline which has caused these "jaws" to move closer to closure. Maintain risk management and s
HY-IG OAS Spread Significant Negative CorrelationHY= high yield option adjusted spread
IG= investment grade option adjusted spread
HY-IG Option Adjusted Spread showing significant inverse/negative correlation to the S&P500.
When the HY-IG spread (white) rises we see the S&P500 (yellow) fall. The inverse is also true. Spread is currently trendin
Gauging Market Sentiment on Risk Using the IG/HY SpreadWhen the spread between High-Yield (HY) debt and Investment Grade (IG) debt contracts or expands, this can be perceived as the market demanding more or less compensation for the risk it perceives to be present in owning the HY debt against the IG corporate debt. (HY-IG) = Risk On/Risk Off market se
See all ideas