High Yield Takes Another Hit

Posted on Dec 2 2014 - 4:39pm by Sharpe Trade

Almost 15 days ago, I outlined the landcape of higher yield instruments.  Those instruments referred to as “junk” status (lower quality credit items which pay you more in terms of yield), or a note that would pay you more as it’s ‘quality’ was lower.

Notice that I did not say “the crisis” or “the avalanche” of high yield instruments.   I prefer calm reason and logic to apocalyptic scare tactics.  And so with that article we outlined a landscape that is already in place (therefore it was not a ‘prediction’) for flight of money away from high yield at the moment.  

At the end of the article, I stated …

I am watching lower quality credit items, and the momentum on yield looking for momentum causing a spike in such yield.  I do expect such instruments to get hit even more than they have been getting hit.  In fact, I can predict nothing, but I would not be surprised if we see such another plunge in higher yield items in the next few days.

And yields are now jumping higher as those items do take a hit as outlined …

Keeping an eye on it, so that we know the landscape of the markets we deal in.  For those that use an instrument like JNK?  Wouldn’t be surprised at all to see it slide through and below $39.

Disclosure:  I do maintain positions in select higher yield Fixed Income instruments, long, at this time in every portfolio that I manage.  No businesses that I am associated with, to my knowledge, has any position in select higher yield Fixed Income instruments, long or short, at this time.  I am not looking to establish new positions in select higher yield Fixed Income instruments in any direction within the next 24 hours. 

1 Comment so far. Feel free to join this conversation.

  1. Sheldon December 3, 2014 at 2:38 pm - Reply

    Not looking good for high yield HYLD has been crushed.

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