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Is High Yield Signaling A Warning To The Stock Market?

Published Fri, 10 Nov 2017 12:41:15 -0500 on Seeking Alpha

We have been stressing the tightness of spreads for many months now though we noted in our recent article titled "Current Valuations In the Bond Market- Part II" that spreads can remain tight for an extended period of time. Since the publication of that report, spreads have moved fairly sharply with the BofA HY OAS spread index falling for six straight days.
The sector has seen quite the run since the bottom of the market in 2009 returning 14% annually aided by low interest rates. In 2016, the space returned over 17% and is up another 7% in 2017 through the end of October.
While still at very low levels, the spread index has moved in a sharp fashion, especially the last few days. Could this be indicating an end to the bull market or some sort of correction, or is this simply profit-taking in an overvalued asset class?

The iShares iBoxx High Yield Corporate Bond ETF- (HYG) has seen a significant amount of volume in the last week. The ETF has been a popular place to park assets and generate a ~5% yield. We have always stated never buy a passive ETF that invests in fixed income. Bonds are a fairly illiquid asset class and to house them into a structure that is a actively-traded intraday vehicle is a dangerous strategy.
The main driver of the sell-off is likely a string of poor earnings reports by a few larger high yield issuers shining a spotlight on the sector. One of the latest is CenturyLink (NYSE: CTL), a heavily leveraged telecom that has several... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
DREYFUS HIGH YIELD STRATEGIES 3.07   0.0 0.00 0.27 9.63
MFS INTERMEDIATE HIGH INCOME FUND 2.68   0.0 0.00 0.00 9.08
CS HIGH YIELD BOND FUND 2.58   0.0 0.00 0.00 8.87
FIRST TRUST HIGHOME LONG/SHORT FUND 14.97   0.0 0.00 0.00 8.82
PIONEER HIGH INCOME TRUST 9.29   0.0 0.00 0.00 8.72
WELLS FARGO ADV INCOME OPP FUND 8.20   0.0 0.00 0.00 8.61
ARES DYNAMIC CREDIT ALLOCATION FUND 15.08   0.0 0.00 0.00 8.56
CREDIT SUISSE ASSET MANAGEMENT INCOME FUND 3.16   0.0 0.00 0.27 8.52
WA HIGH INCOME FUND II 6.76   0.0 0.00 0.00 8.27
BLACKROCK CORPORATE HIGH YIELD FUND VI 10.76   0.0 0.00 0.00 8.01
FIRST TRUST STRATEGIC HIGH INCOME FUND II 12.35   0.0 0.00 0.00 7.77
BLACKROCK DEBT STRATEGIES FUND 10.78   0.0 0.00 0.00 7.63
NEUBERGER BERMAN HIGH YIELD STRATEGIES FUND 12.01   0.0 0.00 0.98 7.45
MASSMUTUAL CORP INV 16.54   0.0 0.00 1.20 7.27
HIGH YIELD INCOME FUND 15.21   0.0 0.00 0.00 7.00
WESTERN ASSET HIGH INCOME OPPORTUNITY FUND 5.07   0.0 0.00 0.00 6.98
SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF 108.94   0.0 0.00 6.07 5.58
ISHARES IBOXX $ HIGH YIELD CORPORATE BOND FUND 87.32   0.0 0.00 4.60 5.27
PROSHARES ULTRAPRO SHORT S&P 500 25.26   0.0 0.00 0.00 2.32
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST 272.32   0.0 0.00 5.67 2.10
PROSHARES ULTRASHORT S&P 500 28.97   0.0 0.00 0.00 1.97
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82
POWERSHARES QQQ TRUST SERIES 1 193.23   0.0 0.00 1.49 0.78
ISHARES BARCLAYS AGGREGATE BOND FUND  
 
 

DREYFUS HIGH YIELD STRATEGIES - DHF
DREYFUS HIGH YIELD STRATEGIES - DHF  


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