Liquidity Premium: Investment Grade vs. High Yield Bonds The chart shows that the premium provided by illiquid IG and HY bonds has been drifting wider. Picture source: Goldman Sachs Global Investment Research
S&P 500 and Bloomberg Barclays U.S. Corporate High Yield Index The chart shows that the S&P 500 and high-yield bonds tend to go up and down together. Keep in mind that historically, the correlation between the S&P 500 and the Bloomberg Barclays U.S. Corporate High Yield Index is 91.7%. Picture source: First Pacific Advisors, LP
U.S. High Yield Credit spreads are fine. Could the market go wrong by predicting significant interest rate cuts? Picture source: Fidelity Investments
Global High Yield Bond Spreads Since 2017 High yield bond spreads have widened recently (difference in yields between high yield bonds and comparative government bonds). Picture source: BlackRock
Heightened Correlations to U.S. Treasury Implied Volatility (MOVE) Followed by Higher Yields This chart suggests that balanced portfolios could suffer as U.S. Treasury yields generally rise after heightened correlation. Picture source: Arbor Research & Trading LLC
S&P 500 and the Shortest Maturity U.S. Treasury Yielded Highest Houston, we have a problem! Picture source: OddStats
S&P 500 All-Time High and Inverted Yield Curve The S&P 500 tends to rise after an inverted yield curve. It has made new all-time highs 5 of 5 times the 10Y-2Y yield curve inverted. Picture source: Fundstrat Global Advisors, LLC
Valuation Gap Between High and Low Dividend Yield Stocks This chart shows that the valuation gap between high and low dividend yield stocks is almost the widest ever. Picture source: Goldman Sachs Global Investment Research
U.S. High-Yield Credit Spreads High-yield credit spreads are still below recession level (red line). A widening high-yield spread remains a useful indicator for predicting a coming recession in the current interest rate environment. You may also like “A Widening of Credit Spreads Is Very Useful to Predict a Recession“
Bond Yields and QE Chart showing that bond yields tend to move higher after QE starts. Picture source: J.P. Morgan
