Weekly option trading video lessons covering topics such
as credit spreads, technical analysis, strategy implementation, and much more.
Other parts of the gold story include indicators of economic confidence and financial - market liquidity, such
as credit spreads and the yield curve.
It was notable that government bonds outperformed corporate bonds by a healthy margin
as credit spreads widened.
It was notable that Government bonds underperformed corporate bonds by a healthy margin
as credit spreads stabilized and government yields rose.
We don't observe adequate compensation for taking on credit risk here,
as credit spreads have become enormously depressed due to yield - seeking speculation.
She notes these ETFs can serve as an alternative to short term bond funds, and potentially provide greater upside
as credit spreads narrow.
The GTFM is determined mainly by confidence indicators such
as credit spreads, the yield curve, the relative strength of the banking sector and inflation expectations, although it also takes into account the US dollar's exchange rate and the general commodity - price trend.
This high - yield, or junk, bond market has been getting a lot of attention lately
as credit spreads have blown out.
Not exact matches
The
credit spread between the two decreased to 2.74 %, a new 15 month low (using last week's corporate bonds
as the comparison).
«Last year from a reported revenue point of view, we had a positive revenue
as a consequence of our
credit spreads widening.
«This is important
as it drives valuations in other products especially
credit where historically
spreads are very tied to volatility.
In this regard, our surveillance has been closely monitoring for any signs of liquidity strains associated with the recent increases in
spreads for high - yield corporate bonds,
as well
as for idiosyncratic events affecting particular funds in this segment, such
as the events surrounding the abrupt closing of Third Avenue Management's Focused
Credit Fund last December.
Tchir also notes that
credit spreads for both Deutsche Bank and European companies
as a class have increased sharply in just a few weeks.
Depending on your personal situation, it could make sense to
spread your
credit card debt over three, four, or five cards, while keeping your balance on each of them below that 35 percent of the total
credit limit mark,
as opposed to maxing out one
credit card.
In some cases, you may save money by consolidating your
credit card balances onto one low - interest card,
as opposed to having that same balance
spread over several higher interest bearing cards.
In fact,
credit spreads in many markets are trading at the lowest levels
as a percentage of their overall yield in a decade (see chart below).
Credit spreads will increase for all sorts of corporates
as the number of distressed corporates will increase and risk aversion will be higher.
A typical measure of
credit conditions are «
spreads» — the difference between the yield of 10 - year U.S. Treasury bonds and that of riskier bonds, such
as high yield.
We imposed overlays in mid-2014 that essentially rule out a hard - negative outlook until that deterioration in market internals or
credit spreads becomes evident (
as it has at present).
At the time, the troika was
credited with saving the world's financial markets from collapse and slowing the
spread of the «Asian Contagion,» a wave of financial market panic that began with the rapid devaluation of Thailand's currency and
spread to other parts of Asia, Russia and Latin America, soon affecting the real economy
as well.
Should
credit spreads continue to widen, particularly outside the already crushed energy space, this will arguably lead to more volatility and also raise more fundamental questions
as to the health of the global economy.
More broadly, he says that while corporate
credit may benefit from aspects of tax reform (i.e., better earnings growth from the corporate tax cuts, modestly lower investment grade supply
as repatriation becomes reality), he does not see tax cuts at this point in the cycle
as a bullish driver of
credit spreads.
To some extent, stock market action also implies expectations for slower economic growth, though interest rate signals, such
as a flat yield curve, are more suggestive of slow growth than stock market action is, and we've yet to see a substantial widening of
credit spreads that would suggest imminent recession.
Suffice it to say that while there remain some bright spots in market action, such
as the overall profile of market breadth (
as measured by the simple NYSE advance - decline line),
as well
as bright spots in economic figures, such
as Friday's upbeat jobs number and the reasonable behavior of
credit spreads to - date, the weight of the evidence is increasingly cautious.
Our research found that
credit spreads often tighten up significantly right
as equities peak.»
Abandon
credit default
spreads levels
as a metric in the long - term incentive plan (we believe this incentive is one reason management is resisting a de-conglomeration
as it may negatively impact their bonuses) and instead adopt ROE.
On the one hand numerous indicators point to solid economic conditions, or at least buoyant economic confidence, and lending conditions are very easy,
as are
credit spreads and borrowing rates.
Credit spreads are blowing wider again, so that does put some downward pressure on Treasury yields
as «safe havens.»
The blue line illustrates the effect of imposing an additional overlay that requires actual deterioration in market internals or
credit spreads as a prerequisite for taking a hard - defensive outlook.
Suffice it to say that an improvement in market internals and
credit spreads would significantly ease our concerns about immediate downside risks, and we'll take that evidence
as it arrives.
It should come
as no surprise that
credit spreads are shrinking between what in theory are risk - free investments and other investments.
As they have done so,
credit spreads on these assets have declined, which means that investors are receiving less compensation for the risk they are taking on.
The more recent narrowing of
credit spreads might also be consistent with concerns about Y2K abating in financial markets,
as participants have become more confident about their preparations (Graph 32).
Investors will also look at
credit spreads for clues
as to where the bond and other markets may be headed.
The wide
credit spreads of recent months will almost certainly help to suppress inflation reports
as the year continues.
In doing so, investors are taking on a range of risks such
as exposure to changes in the shape of the yield curve,
credit spreads or exchange rates.
As you can see the
credit spread for JCPenney Bonds at 769 basis points is much «wider» than the
spread for Exxon Mobile bonds at 119 basis points (a much «tighter» or «narrow»
spread than JCPenny).
As usual, I don't place too much emphasis on this sort of forecast, but to the extent that I make any comments at all about the outlook for 2006, the bottom line is this: 1) we can't rule out modest potential for stock appreciation, which would require the maintenance or expansion of already high price / peak earnings multiples; 2) we also should recognize an uncomfortably large potential for market losses, particularly given that the current bull market has now outlived the median and average bull, yet at higher valuations than most bulls have achieved, a flat yield curve with rising interest rate pressures, an extended period of internal divergence as measured by breadth and other market action, and complacency at best and excessive bullishness at worst, as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weaknes
As usual, I don't place too much emphasis on this sort of forecast, but to the extent that I make any comments at all about the outlook for 2006, the bottom line is this: 1) we can't rule out modest potential for stock appreciation, which would require the maintenance or expansion of already high price / peak earnings multiples; 2) we also should recognize an uncomfortably large potential for market losses, particularly given that the current bull market has now outlived the median and average bull, yet at higher valuations than most bulls have achieved, a flat yield curve with rising interest rate pressures, an extended period of internal divergence
as measured by breadth and other market action, and complacency at best and excessive bullishness at worst, as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weaknes
as measured by breadth and other market action, and complacency at best and excessive bullishness at worst,
as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weaknes
as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of
credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent inflation pressures, particularly if we do observe economic weakness.
In short,
credit spreads are worth watching here,
as well
as the dollar, interest rates, and oil prices.
Southport This week in The Institutional Risk Analyst, we return to one of our favorite topics — namely
credit spreads —
as we consider the most recent statement from the Federal Open Market Committee.
Trading volume for
credit default swaps on French government debt also surged
as spreads spiked.
Elevated valuations keep us cautious in fixed income,
as tightening
credit spreads offer little cushion against rising rates in many parts of the market.
-- We found that
as the cycle has matured security selection based more heavily on
credit quality created dispersion in
spreads and opportunities for further security selection.
The problem comes because of the scarcity of assets, one reason why high - yield
credit spreads have been tightening even
as short term funding rates have risen.
In mid-2014, we imposed the requirement that market internals or
credit spreads must actually deteriorate
as a precondition to establishing a hard - defensive market outlook.
As I've frequently emphasized, the earliest indications of an oncoming economic shift are usually observable in the financial markets, particularly in growing deterioration across broad market internals, and widening
credit spreads between debt securities of varying creditworthiness.
So
as the safe haven appeal of government debt reduces while the overall quality of corporate
credit improves, it's logical for high - yield
credit spreads to tighten.
And European
credit trades at similar
spreads as U.S. or Asian counterparts, despite generally better fundamentals.
Spreads on European emerging market debt have also narrowed
as investor concerns about political developments in Russia have subsided and the country's
credit rating has been upgraded.
By
spreading your investments across
as many businesses
as possible on the Loan Market, throughout a range of
Credit Bands, you'll reduce the impact of bad debt if a business can't repay its loan.