The market is keeping a very close eye on one particular asset class and with good reason. Junk bonds are coming under a nervous eye from investors as they could portend a big move in rates or a fall in stocks. Junk bond ETFs have just fallen to a seven-month low following a slide this week. High yield ETFs have been experiencing losses and outflows and yesterday fell alongside stocks. Junk bond issuers have been seeing lackluster earnings, which has weighed on the sector. Speaking on the junk market, one prominent junk bond trader said “There has been a real lack of willingness of investors to hold on to securities after an earnings miss . . . and it is more pronounced in the last week than it has been in quite some time”.
FINSUM:Junk bonds seem like they might be moving ahead of stocks, so could signal a fall to come. That is exactly why investors are watching the high yield market so closely.