Global Macro: Junk Bonds Move Lower
NEW YORK ( TheStreet) -- Declining junk bond prices indicate that investor sentiment may be rolling over to the downside.
The chart below of iShares iBoxx $ High Yield Corporate Bond (HYG) shows that junk bonds reached yearly highs in late October and have since begun to fall lower, which is significant because equities and high yielding credit tend to be correlated.
Similar to emerging markets, analyzed in yesterday's article, assets hurt by rising interest rates have started to move lower, while equity U.S. equity markets have remained resilient.
The movement lower by junk bonds indicates the Federal Reserve may reduce its bond purchases sooner than expected. Fed members have been on both sides of the fence when discussing their December policy meeting publicly. Some officials see more aggressive stimulus as a must, while others are reminding markets that stimulus is not infinite.Follow @macroinsights This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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