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Junk bonds/funds.........not sure of the implied indications..............

edited August 2011 in Fund Discussions

Was away from the old ranch most of Wed; but did get a peek into a few efts I watch for broad info and directions.
Although HY/HI bonds tend to follow the equity market; and that their down turn followed the equity market retreat in early August. One found yesterday, when the U.S. equity market was in a retreat period, that HY/HI actually had positive NAVs.
The large equity price retreat (-5% at this write) this Aug 18, Thursday, finds some loss in the HYG and JNK etf's; but not in line with the larger equity losses as one might expect.
I do not attempt to make a statement as to "why" this is for yesterday's actions or today's actions.
I am only offering a discover point.



  • may be because if an issuer default, the equity goes to zero and the bond is getting paid, at least partially, and the average recovery for the bond investors is 60%? you didn't really think that bonds and equities are truly the same, did you?
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  • right. and those correlations are perfectly intact today. by definition though, bonds will move less than equity (of the same or similar issuer). they will move less on the upside as they provide fixed coupon, and they'll move less on the downside as their claim is superior to that of equity.
  • actually, mo and mark, this might be a decent time to ADD your free $$ (to respond to mo's other post) to credit strategies.
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