The S&P may have soared 400 points yesterday, but the bond market's index of fear reached an all-time high. High-yield bonds are 1400 BP over the 10-year treasury; the previous high was 1000 BP about seven years ago.
Global recession worries are probably driving this bond market fear. I take this seriously because the fixed-income market values cash repayments; the stock market dreams of growth. At some point, the stock market usually wakes up and smells the bonds.
7 comments:
Can someone please point me to a resource for this information/chart, preferably with a historical chart/numbers?
Great thanks for any help.
Also, Deb, in an earlier comment, you suggested that it would be good to take advantage of this spread sometime soon. Any suggetions as to how we take advantage of the spread?
anonymous, are you referring to "Discount rate spread?" http://www.federalreserve.gov/releases/cp/ or the VIX http://finance.yahoo.com/echarts?s=^VIX#chart2:symbol=^vix;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined or something else entirely?
Fed just opened a new facility, "Money market funding facility."
Kumbo, sorry, I was referring to the discount rate spread. Many thanks.
"Bernanke May Seek New Tactics as Fed Rate Nears 1%" on Bloomberg.com.
So the Discount spread is huge. It begs the question, what would Von Mises do? Bernanke clearly is not allaying the fears the commercial bankers or the markets.
The discount rate spread is on the Fed's website at:
http://www.federalreserve.gov/releases/cp/
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