OASIS FORUM Post by the Golden Rule. GoldTent Oasis is not responsible for content or accuracy of posts. DYODD.

This oughta be good for new highs in the DOW in short order-the FED’ll just print up a few trillion to solve the problem.

Posted by Richard640 @ 19:04 on August 7, 2014  

FRom Zero Hedge

High-Yield bonds funds saw record outflows of $7.1 billion this week – the fourth week running – as the slow-motion train crash in credit starts to accelerate.

As Forbes reports, the huge redemption blows out past the prior record outflow of $4.63 billion in June 2013. The full-year reading is now deeply in the red, at $5.9 billion, with 43% of the withdrawal tied to ETFs.

Simply put, everyone in the bond market knew ‘not’ to sell because liquidity is simply not there; but game theory’s first mover advantage finally broke as retail investors run and create a vicious cycle of ‘liquid’ ETF selling forcing ‘illiquid’ underlying bond selling… just as we warned here and here.

Why should equity investors care? See chart below…

Bond managers are reaching desperately for protection in the CDS market – which is now at 6-month wides – but in the end are forced to liquidate holdings as ETF flows dominate…

You were warned:

High-Yield Bonds “Extremely Overvalued” For Longest Period Ever

High Yield Credit Market Flashing Red As Outflows Surge

Is This The Chart That Has High-Yield Investors Running For The Hills?
* * *

Between a sudden shift to a preference for “strong” balance sheet companies over “weak” balance sheet companies (the end of the dash for trash trade), and this rotation from high-yield to investment-grade, it is clear that investors are positioning defensively up-in-quality ending the constant reach-for-yield trade of the last 5 years.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

Go to Top

Post by the Golden Rule. Oasis not responsible for content/accuracy of posts. DYODD.