We’ve previously noted the narrowing performance divergence between top- and bottom-performing Emerging Market (EM) countries in recent years.
Junk bond option-adjusted spreads (OAS) have remained relatively tight throughout the stock market pullback and recovery (Chart 1), assuring some bulls that the action is nothing more sinister than a “healthy and overdue” correction.
While breadth and leadership accompanying the upswing off February lows have been impressive, the most outstanding feature of this advance might be the confirmation provided by high yield bonds.
It’s time to update our time cycle composites, and what they say for equities in the U.S., U.K., Germany and Japan and long-term interest rates and credit spreads in the U.S.
Steps are falling into place for the U.S. market to climb another 15-20% into 2012.
In trying to assess how far the Fed may ultimately be forced to cut rates, the price action in short term Treasuries and historical yield relationships may offer some clues.
Link between Junk bonds and stock market seems to be indicating that stock investors are ignoring factors pushing Junk bond yields higher.