Now, if we can find a big enough assortment of junk strips (hate paying interest on shorts, hate it) we should be able to sit back and count the hypothetical profits. Unless the default rate somehow goes negative as well. In which case I'll be joining Musk for the one-way ride to Mars.
From Upfina, June 18:
....Why Is Real Junk Negative?
As you can see from the chart below, real high yield debt is negative for the first time ever. Many new investors must be wondering what is going on. It’s not that exciting. In fact, it’s boring. There was a temporary spike in CPI due to base effects and the economic reopening. This situation was combined with near record low rates and very tight spreads. Rates are low because of low population growth. Spreads are tight because of the easy Fed policy and the lack of expected risks in the economy.
And Real Junk Bond Yields sitting at lowest level since never👍 pic.twitter.com/WOnsibs0uk
— Not Jim Cramer (@Not_Jim_Cramer) June 16, 2021The Fed quickly limited the damage in March 2020 when spreads expanded due to the heightened risk environment. When the financial conditions index indicates stress, spreads widen because it’s tougher for highly indebted firms to raise capital. Now, corporations are in fine shape because they were allowed to raise a lot of debt and equity last year. In fact, many now have extra cash. This is leading to higher dividends, share buybacks, and capex. With rates so low and spreads so tight, high leverage is encouraged by investors. However, higher leverage means higher risk. You don’t want to ignore leverage risk because financial conditions can worsen before you realize you must sell.....
....MUCH MORE, on a variety of topics
Recently from Upfina, June 15:Upfina: "This Is The Inflation Peak For Now"
It would be unfair to call Upfina "Inflationistas" but they are definitely inflation wary, so for them to use that headline might be important....
