© Reuters. Credit market correlation breakdown may offer opportunity in loans
- via Simon Ballard at Bloomberg
- Correlation between the U.S. leveraged loan market and high-yield bonds turned negative over the last month – with loan yields rising in tandem with Treasurys, while high-yield spreads to Treasurys continued to narrow.
- The result: Loans offer a 70 basis point yield advantage over high yield bonds, even as high-yield tends to be lower rated.
- At least partial thanks to the “distortion” can be laid at this new era of “quantitative tightening” vs. years of open-ended stimulus.
- Some relevant ETFs: HYG, JNK, OXLC, BKLN, DHY, HIX, PHT, HYLD, EAD, ECC, HYT, JQC, PPR, EFR, CIK, DSU, ACP, BGB, VVR, SJB, ANGL, BGX, NHS, NSL, MCI, PHD, KIO, ARDC, AIF, CIF, PHF, IVH, FHY, BSL, SRLN
- Now read: When Your ‘Fixed Income’ Is Not Really Fixed Income