Looking at the Treasury/high yield spread (TLT; JNK)

From our May 8 post "Time to Attempt the Reverse Long Term Capital Management: Long Treasuries/Short Junk? (TLT; TMF; HYG; JNK)":

The first time we posted this we got lucky and caught 19% (actual, not annualized) in thirteen days, unleveraged. I'm not ready to pull the trigger in the next few minutes but we're close.
TLT   $120.35
HYG $96.27
JNK $41.94
Come on Flight to Safety!
First posted July 26, 2011:

Attempting a 2 1/2 twisting Meriwether, not that high a Difficulty score, so to pull it out the execution must be flawless.... 

...And yes! He sticks the faceplant landing!

Stuff I think about when dreaming up relative value and convergence trades.

LTCM was shorting the more liquid on-the-run treasuries and buying the less liquid off-the-run to catch a few points or shorting treasuries and buying other sovereigns. It worked until Russia defaulted and the crowd did the flight to quality thing: spreads blew out and it was game over....

Here's the one month chart of the Barclays 20+ year Treasury ETF vs the Barclays high yield ETF via Yahoo Finance:

Not the best timing on the LTCM post, even with the wishy-washy "...not ready to pull the trigger..."

But, we may be seeing the early stages of the widening:

Note the turn on Friday afternoon which appears to be continuing today. It is even more dramatic vs the iShares high-yield ETF:

 

Keep your stops tight, sphincters too.