Did the risk measured by the credit spreads increased on this rally?
S&P credit spreads show increased risk on the Fed day, I wonder what it says now, they always update too late...
Gary, what bond or fund are you using to track the credit spreads in between the junk bonds yields and the Treasury yields?
Kisa, as you noted spreads did widen on Fed day but narrowed back yesterday and some more today. I realize spreads are at or near historical lows, but it wouldn't surprise me to see them narrow a lot further - maybe to 2.25% - 2.35% - before this bubble bursts.
Being a holder of junk (22% of my capital) I don't track the spreads as closely as monitoring the daily price movement of junk bonds via a basket of six funds. Legg Mason (LMHYX) Northern (NHFIX) Janus (JAHYX) Federated (FHYTX) the old Strong now Wells Fargo (STHYX) and the one that is most representative of the overall junk market T. Rowe Price (PRHYX)
Junk is the most trend persistent creature in the investment world and since mid August it has been an almost daily march to one historical high after another on a total return basis which includes the accrual of daily dividends.
Edited by Gary Smith, 02 February 2007 - 11:27 PM.