Stocks Tumble; High-Yield Credit Risk Spikes To 1-Year Highs
It appears the post-PIMCO-effect is not wearing off. Having had a weekend to soak up the reality of what outflows will mean for Gross' old shop, credit markets are once again flashing bright red this morning as managers reach for protection ahead of expected redemptions which would force selling into an illiquid market. High-yield spreads are 25bps wider at their highest since early Oct 2013. Equity futures are legging lower with the weakness.
Which is dragging stocks lower...
Bigger picture, things have rolled over quickly..
and for those who defend the ongoing equity exuberance of the S&P by noting that their buyback-funding is investment grade backed and high-yield is in trouble due to liquidity and technicals... think again.... the entire corporate bond market is turmoiling...
Charts: Bloomberg
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Moon is correct. The FED is in denial and causing more damage than good.
Just think what it would be doing if the Fed actually raised rates. No matter how the federal Reserve wants to sugar coat things, they are encouraging riskier and riskier lending with low rates and can't defend against all the fallout. Likewise, cracks are beginning to show in their game of presenting an artificially low rate environment. The low rates only apply to their friends and large Wall Street companies (since they are supporting a runaway stock market).
For all others your rates are rising.